For a number of companies in the biotechnology space, chances are this week is going pretty fast. We have seen some substantial value appreciation across the sector driven by a variety of fresh inputs, including all the usual suspects – data release, drug approvals etc. For others, however, things are probably going a little slower. Just as we have seen many companies pick up strength, we have also seen many depreciate on similar inputs but with opposite implications.
We are now heading to the Thursday morning session, so here is a look at some of Wednesday’s biggest movers, with an analysis of what is driving each, and where we expect the companies in question to go next.
The two companies that we are focusing on for the session today are Cara Therapeutics, Inc. (NASDAQ:CARA) and ImmunoCellular Therapeutics, Ltd. (NYSEMKT:IMUC).
First up, then, Cara.
Cara is developing a drug called CR845, and the company is trying to get it approved in a target indication of postoperative pain. Specifically, postoperative pain in patients that just underwent abdominal surgery – an indication for which the current standard of care treatments (SOC) generally involve opioids or other variations of pain management drugs that have associated with them pretty severe and negative side effects.
CR845 is what’s called a peripherally acting kappa opioid receptor agonist.
in order to understand how this drug works, is first important to understand a little bit about the nervous system. We have the central nervous system (the CNS) and this is the part of our bodies on which opioids, and specifically morphine based drugs, work. CNS action induces pain relief but is also associated with a wide array of CNS-mediated side effects including nausea/vomiting, sedation, respiratory depression, and abuse liability.
CR845 acts on the peripheral system, which involves a different type of receptor, and doesn’t directly impact the brain. Because of this, the abuse liability is removed, and many of the other associated side effects (specifically nausea and vomiting side effect) are removed.
The latest news derives from a phase 3 trial investigating the asset in the above-mentioned indication, with the company noting that an Independent Data Monitoring Committee recommended that the study continues to test both doses of CR845. This, of course, means that the trial is yet to meet its primary endpoint, but it also means that the monitoring committee feels that it has the potential to do so if the numbers continue to play out as is. It also suggests that there are no immediate safety concerns associated with dosing. So, while an endpoint has not yet been hit, the news is ultimately positive, and markets are responding as such.
At yesterday’s post announcement close, Cara was up a little over 10% on its preannouncement market capitalization. In premarket trading on Thursday, the company has given back a couple of percentage points but remains up on aggregate on the news.
Moving on, ImmunoCellular.
This one is not quite so positive.
On Wednesday, the company announced that it will suspend further patient randomization of a phase 3 study of its lead investigation asset, a drug called ICT – 107. The drug is a dendritic cell-based immunotherapy type asset, targeting an oncology indication of patients with newly diagnosed glioblastoma. Early trials looked promising and many have got behind ICT-107 as a potential breakthrough drug in this indication, which is a very tough to treat, and pretty common form of brain cancer.
So why the phase 3 suspension?
Well, it’s all about capital. At this end of the biotechnology sector, one of the primary risks is dilution. Companies have to continuously raise capital to fund trials, since they generally don’t earn any revenues from commercial products. For many companies, this isn’t too difficult. When the more institutional side of the industry turns its back, companies look to public markets, and then debt instruments, to continue to fund operations. In this instance, however, ImmunoCellular seems to have run out of options. The company has noted that the suspension of the randomization for the trial is rooted in its inability to secure funding to continue it, which puts the forward-progress of the trial in question.
As such, and as expected, markets are responding negatively to this news. Much of ImmunoCellular’s valuation was rooted in the potential for this drug hitting shelves, which now looks somewhat unlikely, at least on the back of current pathway. Even if the trial gets back underway, we’re almost certainly going to see some dilution (the company obviously can’t pick up capital on great terms).
The company lost a few percentage points during the session subsequent to its announcement and will likely trade down further throughout the remainder of this week.