As a small cap biotech, it doesn’t get much more risky than ChemoCentryx, Inc. (NASDAQ: CCXI). Not many companies see their share price soar from $10 to $70 only to plunge back below $10—all in a span of less than 24 months.
The highly volatile stock was at it again last week. In the wake of its first-quarter earnings report, ChemoCentryx ran as much as 25% on Friday as the broader market fell. The move could mark an important inflection point for a stock that had been in a sharp downturn since October.
Why Did ChemoCentryx Stock Double in October 2021?
Back on October 8th, ChemoCentryx rallied from $19.60 to as much as $40.90 before closing up 96% for the day at $38.41. The surge was the result of the biopharmaceutical company’s receipt of FDA approval for avacopan. Also known by its brand name Tavneos, the drug was approved as a treatment for a rare autoimmune disease known as ANCA-associated vasculitis.
The approval was good news for the nearly 10,000 people in the U.S. that are diagnosed with the disease each year. From a financial perspective, it was also good news for ChemoCentryx with the treatment expected to command a price as much as $200,000 annually. So, with Tavneos poised to become a billion-dollar drug over the long-term, the market was quick to bid up shares of a company that recorded revenue of $32 million in all of 2021.
The trading volume that day was more than 30-times the stock’s daily average. While this spilled over to a follow-on rally the next day, that’s as high as the stock would go. The excitement around the FDA news faded fast as did the share price, which sunk as low as $15.28 before Friday’s resurgence.
Why Did ChemoCentryx Stock Go Up on May 8th?
ChemoCentryx released first-quarter results after the market close on May 7th. Although the $5.4 million in quarterly revenue was more of the same, positive developments around Tavneos sparked renewed interest in the stock.
Management reported that 248 new patient start forms (PSFs) for Tavneos were received during the period and that the number of physicians prescribing the drug climbed to 281. At quarter-end, some 277 patients were taking Tavneos, confirming a quick uptake for the recently approved treatment.
As expected, all of the company’s revenue was derived from Tavneos, but it is what lies ahead that’s most encouraging. The drug is gaining traction outside of the U.S. as well after it received European and Canadian regulatory approvals earlier this year. With marketing efforts underway in both regions, sales should only get better from here.
Meanwhile, ChemoCentryx is developing Tavneos for additional indications including severe hidradenitis (HS). A phase III clinical trial is expected to start in the second half of the year.
Last, investors liked what they heard about the company’s cancer treatment programs. Its CCX559 product candidate is moving forward as a potential treatment for various cancers and management noted plans to present additional data at oncology conferences this year.
Is ChemoCentryx Stock a Buy?
Last week’s high-volume reversal could be the start of an uptrend for a stock that has had its share of wild swings. As is the case with other relative newcomers in biotech, the growth runway is long and the uncertainty around success high. But that’s part of the appeal of a company like ChemoCentryx—high risk equals high reward potential.
Wall Street certainly has high hopes for ChemoCentryx. Following the first-quarter update, H.C. Wainright reiterated its buy rating and gave the stock a whopping $101 price target. Based on Friday’s close, this means the sell-side research firm sees a path to a nearly 500% return for patient investors willing to incur the risk. The rest of the Street has remained mostly bullish on the stock through its dramatic ups and downs.
The long-term growth prospects around Tavneos and ChemoCentryx’s other drug candidates have strengthened over the last six months while the stock has weakened. It has fallen victim to the recent market downturn with high growth stocks (and especially biotech) facing the brunt of the selloff.
Eventually, the market will get reacquainted with the company’s Tavneos progress. What sparked the stunning October 2021 hasn’t disappeared. It has only been put on hold until market conditions improve.
As ChemoCentryx provides further updates around its pipeline, look for the next major stock price move to be uphill.