The legacy of Axovant Gene Therapies (NASDAQ:AXGT) is one of disappointment. The business soared to a market capitalization of $2.4 billion in mid-2017 on high hopes for a promising drug pipeline, but a series of failures forced a reckoning on Wall Street and within the company. In the summer of 2018, management changed the company's name from Axovant Sciences to go all in on gene therapies, an entirely new development focus.

While the business is valued at less than $150 million today thanks to a recent tumble in shares, investors may wonder if the dip represents an opportunity -- albeit a very risky one. After all, Wall Street has clamored over anything related to gene therapy, and Axovant Gene Therapies is still in the earliest stages of developing its pipeline. Is there any reason to think the gene therapy stock is a buy?

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What's on the horizon for Axovant Gene Therapies?

The gene therapy developer announced an important business update in the first week of June. Investors learned that Axovant Gene Therapies decided to terminate a licensing agreement for AXO-AAV-OPMD, a genetic medicine aimed at oculopharyngeal muscular dystrophy (OPMD), with Benitec Biopharma. Terminating the development deal, which was struck in summer 2018, narrows the pipeline focus to three experimental therapies.

The lead drug candidate, AXO-Lenti-PD, is currently being evaluated in a phase 2 trial as a potential treatment for Parkinson's disease. Axovant Gene Therapies provided data from the six-month mark that appear to show meaningful benefits in quality-of-life metrics, but the interim data are from just two patients. A low patient population makes it difficult to project the risk-benefit profile of the drug candidate, although investors and analysts have another reason not to get too carried away.

Consider that AXO-Lenti-PD has the ambitious goal of delivering three genes with the potential to restore dopamine levels in individuals affected by Parkinson's disease. Most genetic medicines attempt to restore a single gene -- and even that's proving to be an incredibly difficult feat to pull off. Moreover, Axovant Gene Therapies is targeting a poorly understood disease.

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The company's other two drug candidates, AXO-AAV-GM1 and AXO-AAV-GM2, are taking aim at rare hereditary gangliosidosis diseases characterized by the buildup of faulty proteins that destroy nerve cells.

Axovant Gene Therapies has enrolled a limited number of patients and data are available for only one patient thus far. To be fair, gene therapy clinical trials typically enroll a small number of patients, and the company is still enrolling patients. It expects to report additional data for each of its three ongoing clinical trials before the end of 2019. That includes three-month data for patients in the second cohort of the phase 2 trial for AXO-Lenti-PD, an update from the first patient dosed with AXO-AAV-GM1, and data from multiple patients with AXO-AAV-GM2.

That timeline highlights the early-stage nature of the company's pipeline. Development will prove expensive, but the business had roughly $85 million at the beginning of 2019 and raised an additional $40 million in the first quarter. That should be enough capital to generate meaningful data from ongoing studies. Ideally, the clinical data will impress, allowing the company to court deep-pocketed partners to share development costs. But outcomes remain uncertain based on information available today.

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A gene therapy stock to avoid

To be blunt, Axovant Gene Therapies is not the best investment in the gene therapy or broader genetic medicine space. The highly competitive field is flush with cash and good hypotheses, attracting the attention and capital of major pharmaceutical and biopharmaceutical companies.

Unfortunately, the sub-$150 million business has been left out of the field's rise, suggesting the collective wisdom of the biopharma industry isn't interested in the company's approach. While there is always a handful of overlooked small-cap stocks that prove everyone wrong, recent events and pipeline updates don't provide much reason to think Axovant Gene Therapies has a coherent strategy in place that would even provide the chance to wear that label. For now, this gene therapy stock is simply too risky for your portfolio.