In the time it takes most newborns to sprout their first teeth, AveXis Inc. (NASDAQ: AVXS) looks ready to sink its teeth into the biotech industry. Since its market debut in early 2016, stellar clinical trial results for its lead candidate have propelled the stock about 349% higher.
A secondary share offering to bolster its cash balance has caused the company's market cap to rise even faster than its share price -- about 457% since its IPO, to about $2.25 billion. While the company's lead candidate has all the makings of a winner, investors are right to wonder if all the good news is already baked into the stock price, which is currently near its all-time high.
Let's take a closer look at AveXis Inc.'s surprising success, and the arena its lead candidate for the treatment of spinal muscular atrophy (SMA) could eventually compete in, to see if the stock is still a buy at recent prices.
In the Bag?
More often than not, biotech start-ups take several years after their IPOs to produce a clear sign they have a shot at earning an approval for their first drug. AveXis needed just three months.
Last May, the company presented compelling evidence from a 15-patient clinical trial that strongly suggests AVXS-101 works as intended. Historical data shows 75% of infants that display SMA symptoms don't reach 13.6 months of age without requiring constant breathing support from a ventilator. Last May, Avexis announced all 15 patients given AVXS-101 were still alive and breathing without assistance.
At the first interim analysis last year, some of the patients hadn't been enrolled long enough for 13.6 months of observation. That's why the stock soared again earlier this year when the company announced all 15 patients indeed survived 13.6 months, and many of them for far longer, without requiring constant ventilation.
Results from the 15-patient trial as of the cut-off point this January were nothing short of amazing. All patients weren't just breathing on their own -- a surprising number achieved motor-skill milestones rarely observed among type-1 SMA patients.
You should always be wary of clinical trial results weighed against historical data instead of a placebo control group, but results from the 15-patient study are so compelling that it seems the Food and Drug Administration (FDA) is willing to review an application supported by another single-arm study. After meeting with the Agency, Avexis announced it would support a future application for AVXS-101 with a 20-patient study that won't contain a control group. If results fall in line with what we've already seen, it's hard to imagine the FDA not giving the candidate a big thumbs up.
If you can't beat 'em...
If approved, AVXS-101 won't be the only SMA therapy available. Late last year, the FDA approved the first one -- Spinraza -- a drug discovered by Ionis Pharmaceuticals (NASDAQ:IONS) and marketed by Biogen (NASDAQ:BIIB). It's still early in the commercial launch, but Spinraza is expected to generate annual sales between $1 billion and $2.5 billion at its peak.
Going up against an industry heavyweight like Biogen would be daunting, but based on available clinical trial data, it looks like AVXS-101 is far more effective. During a 121-patient study supporting Spinraza's approval, just 61% of patients were still breathing on their own at 56 weeks. Although the only AVXS-101 study was much smaller, the observed 100% ventilator-free survival rate over a much longer time frame bodes well for Avexis.
There's also a dosing advantage. The 15 patients treated so far with AVXS-101 underwent a single infusion. In stark contrast, Spinraza treatment requires six injections during the first year, and three each year thereafter. With a list price of about $125,000 per dose for Spinraza, Avexis could charge millions for a single dose of AVXS-101 and it would still be less expensive than Biogen's therapy over the long run.
It isn't unusual for big drugmakers with piles of cash to buy out a potential competitor. Biogen finished March with about $3.9 billion in working capital, and I wouldn't be surprised if it offers Avexis a juicy licensing deal for AVXS-101, or acquires the entire company at a premium.
An offer from Biogen or another cash-laden drugmaker would almost certainly drive Avexis Inc.'s stock well above its present level. In lieu of such a deal, a successful launch of AVXS-101 would probably give the company's shares a big lift over the long term, as well.
There's always a chance that unforeseen issues could cause the stock to stumble, and a single-arm 15-patient study isn't exactly a big cornerstone to build an investment thesis around. For investors willing to take such a risk, though, I'd say Avexis is still a buy at recent prices.