Global Blood Therapeutics, Inc. (NASDAQ:GBT) is attracting its fair share of media attention right now in the biotechnology space, with the company having just put out some news related to one of its lead development assets.

Specifically, the news relates to the side of the company’s pipeline that’s aiming to treat a condition called idiopathic pulmonary fibrosis. This is a condition that involves the scarring of the lungs and the fibrosis in the name refers to the buildup of this scarring. When you get fibrosis, it can result in difficulty breathing which, in turn, can lead to a whole host of other physical and mobility-type impairments – not to mention the fact that it makes it difficult to maintain any degree of exercise regimen and this, in turn, translates to obesity issues, all that sort of thing.

Anyway, Global Blood Therapeutics was trying to get a treatment on shelves that could add an option to the current portfolio of options (which isn’t particularly far-reaching) and some early stage testing of the drug in question hinted at potential efficacy in this population.

As per the latest development, however, it doesn’t seem like that’s the case anymore.

Management just put out a press release outlining the fact that Global Blood Therapeutics has made the decision to stop testing its lead drug, a drug called GBT440, in the above discussed ITP indication. The driver behind the decision, according to the release, was a perceived lack of efficacy in the target population, as determined on the back of three early and mid-stage clinical trials, which “did not demonstrate sufficient overall clinical benefit to justify continuing the program,” (said Chief Executive Ted Love).

So what’s next for the company?

Well, this is a bit of a unique situation.

Global Blood Therapeutics was looking at this asset in two primary indications – one, the above-discussed ITP target and two, a concurrent target of a condition called sickle cell disease. This is a blood-related condition in which the red blood cells form a sort of sickle shape (think a crescent moon) and this results in them getting bunched up in blood vessels and causing blockages. These blockages can be incredibly painful for sufferers and – worse – can result in long-term damage to the circulatory system and, eventually, death.

So, just as it was doing with the ITP target, Global Blood Therapeutics is trying to offer these patients (which don’t have much in the way of viable treatment options right now and especially when it comes to treatment options that don’t have nasty side effects) a fresh treatment option to add to the limited portfolio of existing therapies.

With the latest announcement, then, the SCD indication becomes the primary and lone target.

What are the implications of this?

The implications are two-sided. In the development stage biotechnology sector, conservation of capital is a major factor in the ability of a company to return shareholder value. If capital is not allocated efficiently, a company will generally need to issue equity to raise regularly and this will translate to some heavy dilution for shareholders.

With GBT now having a single target indication, the company is going to be able to reduce the costs that it had forecast as projected R&D costs over the coming twelve months and beyond. This should extend runway considerably and should ease some of the downside risk associated with an exposure to the company at current prices.

That’s the good news.

The bad news is that the dropping of what amounts to 50% of its pipeline puts a large amount of pressure on the SCD program. The program has the potential to be a multi-billion dollar revenue generator for GBT if it matures through to a successful completion, which is likely why management has decided to focus its efforts 100% on getting some solid data in front of the FDA come regulatory submission. If we see some disappointing data at the program’s maturity though (in other words, if a pivotal trial fails to meet its primary endpoint) the company is basically dead in the water.

Bottom line: this is a risky move by management but that doesn’t mean it’s the wrong one. If it pays off, it will be looked back on as calculated and smart.