On Friday, Ardelyx (ARDX) shares plummeted 37% despite passing the primary endpoint of a phase 3 study. The company tested its drug Tenapanor in phase 3, clinical trial known as T3MPO-1. The trial recruited patients with a disease known as irritable bowel syndrome or IBS. Tenapanor is the company’s small molecule NHE3 inhibitor. The drug in the study was able to achieve the primary endpoint of the study, and at least 7 out of 8 secondary endpoints.

The primary endpoint of the study was the combined responder rate 6 of 12 weeks. The drug showed that the Tenapanor patients had a greater 30% reduction in abdominal pain, and an increase of one or more complete spontaneous bowel movement. The Tenapanor side of the patients achieved a response of 27% of therapy versus only 18.7%. The primary endpoint was met with the drug having a p-value of: p = 0.02, meaning with statistical significance.

With so much good data why on earth did the stock tank by 37%? There are two factors involved with that issue. The first of which may be that the last secondary endpoint was not met. Still, that wouldn’t be enough to cause a fall, despite Tenapanor reaching statistical significance. Well, then it must be the last factor. That is the fact that at least 14% of patients that took Tenapanor in the phase 3 trial saw an increase in the side effect of diarrhea.

That is very substantial because a competitor that has already received approval by the FDA has a lower rate of incidence of diarrhea. For example, Synergy Pharmaceuticals (SGYP) Trulance had a rate of only 5% of patients having diarrhea. The issue with this is that if Tenapanor is ultimately approved it may not do as well selling in the same market as Trulance. That is likely the reason why the stock still tanked despite passing the primary endpoint of the study.