Why has this ASX biotech fallen nearly 50% today?

Shares in Echo IQ Ltd (ASX: EIQ) have fallen 48% to after the company failed in its bid to get US Food and Drug Administration (FDA) approval for its heart failure decision support software EchoSolv HF.

Company to regroup after knockback

The medical technology company said in a statement to the ASX that the FDA had issued a Not Substantially Equivalent determination for the application, rather than approving it for use by clinicians.

Echo shares fell as low as 47 cents, however have since rebounded slightly. At the time of writing, they are trading for 69.5 cents.

Echo IQ said it was now considering its options.

The company said:

Upon receipt of the FDA’s determination, Echo IQ, together with its US regulatory and legal advisors, its study partners, and independent statistical experts, has commenced a detailed review of the regulatory matters raised. The Company believes there is a pathway forward for clearance under the 510(k) route and intends to engage with the FDA to further clarify the matters identified in the determination and assess all administrative and regulatory options available to Echo IQ. This process will inform the most appropriate and efficient pathway to progress EchoSolv HF towards US regulatory clearance.

Echo IQ said it remained confident in the clinical rationale underpinning EchoSolv HF, “and the significant unmet clinical need in the identification of patients with heart failure”.

The company said it also planned to continue its broader US commercial strategy, which involved other products.

The company added:

This determination does not impact the FDA-cleared EchoSolv AS platform or its ongoing commercialisation in the US. Echo IQ will continue to advance its US commercial infrastructure, reimbursement pathway, customer pipeline and strategic relationships, providing a platform to support the future commercialisation of EchoSolv HF, subject to obtaining required regulatory clearance. In parallel, Echo IQ will continue to invest in its broader R&D pipeline, including the development of solutions targeting additional disease states and new clinical modalities.

Management to reassess the company’s position

Echo IQ Managing Director Dustin Haines said that while the company was disappointed in the decision, the determination provided the company with detailed feedback, which could be used to potentially take the program forward.

He added:

Our immediate priority is to understand the matters raised in full and determine the most efficient pathway forward. We remain confident in the underlying technology, the clinical rationale for EchoSolv HF and the significant opportunity to improve the identification of patients at risk of heart failure.

The company said it remained well-funded with more than $105 million in cash.

Broker Morgans recently had a speculative buy rating on Echo IQ with a price target of $1.85.

The post Why has this ASX biotech fallen nearly 50% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.