A late week mover in the biotechnology space this week is Intec Pharma Ltd (NASDAQ:NTEC). The company just announced some fresh guidance rooted in a phase 3 trial that is ongoing and markets are selling off on the guidance pretty strongly.
At last count, the company was down nearly 25% on its pre-update market capitalization.
The trial in question is, as mentioned, a phase 3 trial, and it’s looking at the potential safety and efficacy of an asset called the Accordion Pill Carbidopa/Levodopa in patients with Parkinson’s disease.
This asset is a pretty interesting one, so it’s worth taking a bit of time to describe how it works.
Patients with Parkinson’s disease generally receive, as a standard of care treatment, a combination of carbidopa and levodopa. The latter is designed to ease the symptoms of the disease while the former is a sort of complementary treatment that is designed to increase the amount of levodopa that crosses the blood-brain barrier.
It’s an effective treatment but, due to the fact that most of the levodopa is absorbed in the upper levels of the gastrointestinal tract, patients suffer from what are called OFF periods, which are essentially periods during which there is no active compound in place to ease symptoms and – as a result – during which symptoms are incredibly severe.
Intec developed its so-called ‘Accordion pill’ as a proprietary technology that can potentially increase the period of time for which an active compound remains active in the body. It’s essentially a capsule that has the active compound (whatever that may be) spread across a thin film-like element and tucked inside the capsule in an accordion-like fashion (hence the name).
The idea is that the capsule coating will dissolve when it hits the stomach and the film will unravel and sit in the stomach for – in this instance – up to 12 hours before biodegrading.
This should theoretically extend the period for which the drug remains active and can – potentially – remove the necessity for a patient to undergo OFF periods in Parkinson’s disease treatment.
It’s a neat solution but does it work?
Well, that’s what the phase 3 trial we are looking at here was set up to show and, based on the latest update, the short answer is that we just don’t know right now.
As per the news, the company is extending guidance for enrollment completion from its initially stated third quarter this year or first quarter next year to the third quarter of 2018 at the earliest. This basically adds a minimum of six months onto the time shareholders are going to have to wait before any results hit press, regardless of what the results say, and that’s why the company is taking a hit right now.
Here’s what management had to say as regards to the driver behind the decline:
“(The company is) expanding planned enrollment to 420 patients to account for a higher than expected attrition rate during the titration period that precedes patient randomization. The attrition to date is largely due to patient withdrawals related to endoscopy procedures performed on the initial 100 patients, as well as withdrawals occurring during the open-label Sinemet titration period that precedes exposure to the Accordion pill. ”
For a company like Intec, which is at the smaller end of the biotechnology space, capital burn is everything. With an extended period to completion for its lead development asset, the company is going to have to spend more money keeping the lights on while the trial in question completes.
This, in all likelihood, will necessitate some degree of dilution on the back of an equity raise. So, when we say that the company is declining on the back of the extended period to trial completion, the real reason behind the decline is the fact that Intec is going to have to spend more money than it otherwise might have before it hits a potentially major upside catalyst – the outcome of the trial in question.
With that said, however, if the study does close out positively, then we will almost certainly see a recovery towards (and likely beyond) the price from which the company has fallen during the session this week.
For anybody looking for a discount entry, therefore, current prices might be a nice punt ahead of any potential recovery.