One company that ended up taking a real hit on Wednesday in the biotechnology space was Acorda Therapeutics, Inc. (NASDAQ:ACOR). This one is a development stage entity and the company has been trying to get a Parkinson’s drug to market in the US. Specifically, the drug is called tozadenant and it is part of a family of drugs called A2A antagonists. In patients with Parkinson’s disease, the standard of care treatment is a drug called levodopa. This drug has long been used as a first-line therapy in a syndication and it is well-established and – to a degree – highly effective in the relief of certain symptoms and the slowing of progression of the disease. However, it has a darker side. It is effective while it is working, during what is called the ON period, but when it’s not working, called the OFF period, patients generally suffer from pretty severe side effects and symptoms including nausea and a loss of certain motor controls.
OFF periods come around at least once a day and they progressively get worse as the disease itself progresses over time.
There are a number of drugs that seek to reduce the severity of OFF periods but very few work effectively and many reduce in effectiveness the more a patient takes them, which renders a large portion of the available options useless after a certain period of time.
With tozadenant, Acorda was hoping that it could get an extra asset to market and bring an extra option to these patients.
So what just happened?
Acorda is carrying out some long-term safety studies that were set up to ascertain whether or not the drug can not only remain effective over time but, at the same time, can avoid bringing about any severe safety or tolerability concerns. The reason these studies are necessary is that A2A antagonists have been shown to potentially cause problems after chronic use and – in a condition like Parkinson’s – chronic use is almost always necessary.
At the same time, Acorda is also carrying out a phase 3 investigation that it hoped would build on the already available efficacy data and, in turn, underpin a registration application to the FDA on completion.
As it turns out, however, there are some safety concerns.
According to the company, five people have died in the long-term safety studies, having developed sepsis and having been subsequently unable to rid themselves of the infection based on a low white blood cell count.
Markets are looking at the low white blood cell count as being caused by tozadenant and, in turn, are selling off on the company on expectations that it might have difficulty getting the drug approved and, even if it does get approved, might have difficulty attracting market share based on said safety concerns.
Another big mover on Thursday was Mirati Therapeutics, Inc. (NASDAQ:MRTX).
This one is a totally different type of move.
The company announced after-hours that it intends to carry out a public offering as part of which it will issue an as yet undisclosed amount of common stock and, subsequent to the issue, grant the underwriters a 30-day option to purchase up to an additional 15% of the shares of common stock offered in the public offering.
Subsequent to the announcement, the company has taken a real hit and is currently trading for a close to 10% discount to its market close place on Thursday afternoon.
The reason these sorts of announcements are generally negative for a company, and especially for one at this end of biotechnology space, is that equity issue almost always translates to dilution. No shareholder wants dilution and, as such, when shares are added to the base, price will dip to reflect the reduced proportional representation of value each individual shareholder’s exposure amounts to.
Sometimes, however, there can be an opportunity to pick up some cheap shares on an oversell – especially if the company in question can use the cash it raises to push forward to a major near-term catalyst and, in turn, can raise its share price on the back of said catalyst hitting press.
There are two sets of results from lung cancer trials set to hit press by the middle of next year, one from a phase 1 and one from a phase 2, and a mid-stage trial in the same indication but investigating the drug in question, called mocetinostat, in combination with the already approved durvalumab, set to hit press during the first quarter of next year.
For us, that looks like a pretty solid raft of catalysts and – in turn – might set this company up as a discount buy.