The risk that a drug in development might fail to meet its targets or satisfy the regulators’ assessment is one investors of biotech companies always need to consider. But if the drug impresses in testing and cuts the mustard in the regulators’ eyes, then the rewards are like in no other segment of the stock market.
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Chemocentryx (CCXI) is a good example here; in Friday’s session, shares almost doubled after the biotech’s treatment of a rare autoimmune disease received the FDA’s seal of approval.
The agency approved avacopan, now going under the commercial name of Tavneos, Chemocentryx’ treatment for anti-neutrophilic cytoplasmic autoantibody (ANCA)-vasculitis (AAV) – a rare and painful disorder which can cause inflammation and even destruction of small blood vessels.
The company owns the U.S.’ rights for Tavneos, and it will now push ahead with the U.S. marketing of the drug. Around 9,500 people are anticipated to be identified as having severe forms of ANCA-associated vasculitis, and with the treatment’s wholesale price expected to be between $150,000 to $200,000 annually, the potential windfall here has obviously gotten Wall Street excited. And so is Raymond James’ Steven Seedhouse.
“We believe Tavneos will become standard of care in ANCA, making it a blockbuster product,” the analyst confidently said. “We anticipate continued treatment with avacopan after achieving remission will only increase with additional postmarketing data. Post marketing studies that supplement the long-term safety database and potentially provide additional efficacy data in the maintenance setting should bolster the out year opportunity for Tavneos in ANCA vasculitis.”
Furthermore, as the label will show no restrictions on duration of use or subgroup, the analyst calls it “virtually a best-case outcome.” Not to mention, as the company has earmarked the drug as a treatment for other diseases, such as hidradenitis suppurativa and lupus nephritis, Seedhouse believes it has a “pipeline in a drug.”
Seedhouse anticipates peak U.S. sales of ~$1.8 billon, with “assumed peak royalties of ~$130 million from the EU (pending approval) and Japan (approved) combined.”
Shares might have almost doubled in Friday’s session, but Seedhouse thinks they will rise another 164%, as the analyst raised the price target from $62 to $107. There’s also a rating upgrade too – up from Outperform to Strong Buy. (To watch Seedhouse’s track record, click here)
The rest of the Street has a more measured take currently, although it is still a positive one; based on 5 Buys vs. 1 Hold and Sell, each, the stock boasts a Moderate Buy consensus rating. The average price target stands at $55.67, suggesting shares have room for 45% upside in the year ahead. (See CCXI stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
