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Concord Biosciences Holdings, Inc. (NASDAQ:HRMY) is staying depressed due to the failure of a Part 3 research for pitolisant in sufferers with Idiopathic Hypersomnia, challenges from quick sellers, growing doubts about its patent property, doubt concerning the worth of its Zynerba acquisition, and growing competitors from a couple of rivals, together with Axsome Therapeutics (AXSM). The inventory is down a couple of proportion factors from after I final coated it in Might, however that is as a result of it was already down by then. In October this yr, after its part 3 research failed to satisfy its major endpoint, the inventory shed 40% of its worth. That it did not lose extra might be as a result of pitolisant, branded Wakix, is a reasonably robust income generator. As I wrote final yr:
Extreme daytime sleepiness may be attributable to narcolepsy, obstructive sleep apnea, and a number of different elements. Wakix is permitted to deal with EDS or cataplexy (temporary assaults of weak spot on emotional arousal) in grownup narcolepsy sufferers. It’s at present the one FDA-approved non-scheduled narcolepsy drug with a handy, once-daily dosing. The narcolepsy market is giant, at $2bn, and Wakix with its handy dosing and novel mechanism of motion is well-positioned to seize an excellent chunk of that market.
Wakix is a profitable drug. In its 4+ years of market existence, the asset has revamped $1bn for Concord. Though its monopoly has come below problem from junior friends, Concord’s plan was to get it permitted for newer indications and develop its topline. That plan has come below appreciable cloud with the trial failure in Idiopathic Hypersomnia.
On October 13, the corporate introduced this knowledge within the header of its launch thusly:
Though major consequence for extreme daytime sleepiness (EDS) between pitolisant and placebo didn’t attain statistical significance within the randomized withdrawal part, additional knowledge evaluation is ongoing to tell subsequent steps
Constructive traits favoring pitolisant had been noticed in different prespecified endpoints together with Idiopathic Hypersomnia Severity Scale (IHSS) and Sleep Inertia Questionnaire (SIQ)
Security and tolerability profile in grownup sufferers with idiopathic hypersomnia was per established security profile of pitolisant
The totality of proof from INTUNE research and the Orphan Drug Designation for pitolisant gives optimism for subsequent steps with FDA
Thus, there was no clear win, making the scenario dangerous for pitolisant on this indication. The corporate now has to run with “the totality of proof,” as an alternative of the far more sturdy “major endpoint win.”
Wakix has a number of benefits over its friends, an important of which is its non-scheduled nature. Meaning, it’s not susceptible to abuse like its rivals. Xyrem and FT-218, for instance, are variations of sodium oxybate, and are schedule 3 managed substances, whereas AXS-12 is a schedule 4 managed substance. Thus, to a various extent, these medicine are susceptible to abuse whereas wakix shouldn’t be. This has broad implications for insurance coverage in addition to prescriptions.
The issue for Concord is that Wakix is its one-trick pony. There are two methods to succeed: one is label growth, the place they at present have two labels and want this one for additional development. The opposite is buying new property. This they endeavored to do by buying Zynerba.
Nevertheless, there are some doubts about this one as effectively. Concord acquired Zynerba for $200mn earlier this yr, nonetheless, its key asset, Zygel, has its doubters, together with analysts at Goldman Sachs who lately stated that Zygel’s knowledge is not sturdy. Zygel is at present working a Part 3 trial for sufferers with Fragile X syndrome, a uncommon behavioral dysfunction with no FDA-approved therapies. In 2020, it missed a pivotal trial in the identical indication, attaining neither the first nor any of the secondary endpoints. Whereas Zynerba recovered sufficient to supply strong knowledge in April this yr, these doubts stay.
A 3rd downside is the quick assault from Scorpion Capital. I mentioned this in my earlier article, so, for background, I’ll merely reproduce the title of the quick report, and allow you to resolve for your self whether or not you possibly can belief a report with a title like this:
The Newest Value-Gouging Ploy By The Grifter Who Impressed Convicted Felon Martin Shkreli, However This Time Individuals Have Blood On Their Fingers: A $175,000 Per 12 months Drug With Alarming Toxicity And A Path Of Coated-Up Deaths And Accidents; No Efficacy; A Non-Existent Mechanism Of Motion; Sham Patents; Based mostly On Rip-off Scientific Trials In Locations Like Russia And Turkey By A French Quack; Pushed Through False Promoting And A Huge Off-Label And Doctor Kickback Scheme
Sure, that’s the title in its entirety. In August, Concord received a small victory over Scorpion Capital after an attraction in opposition to the validity of its key patent was rejected by the USPTO. One other citizen’s petition filed by Scorpion was termed “nonsubstantive” by the FDA.
The ultimate downside right here is patent expiry. Their key patent expires in 2028, and whereas there are different methods to achieve market exclusivity, none are as sturdy as a composition of matter patent.
Financials
HRMY has a market cap of $2bn and a money stability of $438mn. Internet product revenues for the quarter ended September 30, 2023, had been $160.3mn. Analysis and Growth bills had been $17.5 million within the third quarter of 2023, gross sales and Advertising and marketing bills had been $23.4 million, and basic and Administrative bills had been $22.5 million. Complete working bills had been $63mn. That provides them a money runway of a number of quarters.
Backside Line
HRMY has had its ups and downs during the last 18 months, and there was a time after I thought I ought to have purchased the inventory. Proper now, although, I’m not so positive. The inventory shouldn’t be buying and selling at its yearly lows, and the trial failure has weighed on its worth proposition. Till Concord Biosciences Holdings, Inc. meets with the FDA and comes out with a powerful plan for this program, I do not consider it’s adequately de-risked.
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