The final six months 2015, and pretty much the entirety of 2016, proved a tough period for the majority of biotechnology companies. What initially began as an investigation into pricing activity sparked by the Shkreli debacle, quickly escalated into a political hot topic, and culminated with the now infamous Hillary Clinton Tweet that sent the previously buoyant biotech sector into freefall. One company that got hit particularly hard, and with no real fault of its own, instead driven by external macro factors, was Concert Pharmaceuticals Inc (NASDAQ:CNCE).

At its 2015 peak, Concert Pharmaceuticals traded for a little over $24 a share. By mid November 2016, this had declined to just eight dollars a share – a more than 66% decline across the period.

Year-to-date 2017, however, the company has seen something of a revival. It currently trades for just shy of $10 a share, which is of course a long way off the 2015 highs, but it’s a step in the right direction for shareholders nonetheless. The majority of these gains have come on the back of a recent announcement, detailing an orphan drug designation from the FDA for one of   its lead asset, a cystic fibrosis drug currently under investigation as part of a clinical program.

It’s in phase 2 right now, and data from this trial is expected to hit press by the end of 2017. That’s a pretty long wait, but with the potential for some interim numbers before topline hits, and for those willing to hold on to a position for a few quarters ahead of the release, they could be a decent opportunity to get in in front of wider markets on this catalyst.

So, what is the drug, and what impact might have if the data is positive?

As mentioned, it is a cystic fibrosis target, and it is called CTP-656.  The mechanism of action on this one is pretty interesting. Basically, Concert’s pipeline consists of currently approved therapies marketed by other companies, which the company has altered slightly using its proprietary technology. Specifically, the company uses a platform called its DCE platform to modify existing drugs to include what’s called Deuterium. The addition of Deuterium to a drug compound increases its half life, and this has a number of collateral effects that work together to improve the drug as a whole. Specifically, it improves the metabolic profile, which in turn, improves oral bioavailability. Additionally, the increased half life generally translates to a reduction in dosing requirements, and this – in turn – serves to improve patient compliance.

In this instance, the drug that Concert is adding Deuterium to is called ivacaftor, which is currently marketed as a cystic fibrosis drug by Boston, Massachusetts-based healthcare company Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).

Data to this point has been indicative of clinical benefit, and the science that underpins its mechanism of action seems sound, but of course, it is difficult to say with any certainty for a drug in phase 2 trials whether it has a good chance of making it through to pivotal. With that said, the approach taken by this company is one that dramatically improves the chances of drugs getting through early-stage trials, rooted in the fact that the modified asset is exactly that – a modification of a currently approved and generally regarded as safe drug.

So, what impact might an approval have on Concert’s market capitalization?

On a quarterly basis, Vertex generates a little over $400 million from its cystic fibrosis portfolio. This consists of the above-mentioned ivacaftor as a single agent asset, and also in combination with one of the company’s other drugs, lumacaftor. The combination asset generates a slightly larger portion of these revenues than the single agent, but it is reasonable to assume that if Concert can bring its drug to commercialization, it could attract a large portion of both sides of the equation. As such, a conservative estimate on this drug’s potential revenue generating ability comes in somewhere around $100 million-$200 million. That’s a long-term projection, but it’s realistic. At last count, concert held a market capitalization of a little over $200 million. As such, we believe that there is a mid to high double-digit percentage gain, if not slightly more, on topline data hitting press as indicative of efficacy and beneficial over current standard of care (SOC).