Shares of ChemoCentryx (NASDAQ:CCXI) have shot up significantly after the company announced positive results for a trial focusing on its leading drug candidate. With investors impressed by this piece of news and Wall Street analysts doubling down on their already optimistic ratings for the company, is this the right time to buy into the stock?

Let's take a deeper look at the trial data in question, the rest of ChemoCentryx's pipeline, and whether investors should buy the biotech stock now or wait for prices to possibly settle down?

Red blood cells traveling inside an artery

Image source: Getty Images.

Diving into the data

On Nov. 25, ChemoCentryx announced the results for its phase 3 Advocate trial, which was testing the efficacy of its lead drug candidate, avacopan. This drug, which functions as a C5a receptor inhibitor, helps patients with a rare autoimmune disease called anti-neutrophil cytoplasmic antibody (ANCA)-associated vasculitis. This condition affects the small blood vessels in the body, causing them to swell and become inflamed. These inflamed blood vessels can then cause damage to organs, with the kidneys being especially vulnerable due to their role in processing blood. Avacopan has shown promising results as an oral treatment, with past clinical studies employing a twice-per-day dosing schedule for patients. 

The study, which looked at 331 patients who had ANCA vasculitis, met its primary endpoints, with patients reporting significant remission in the disease after 26 weeks of sustained treatment. Initial remission level after 26 weeks was 72.3% for all patients taking avacopan, compared to 70.1% in the second group taking a glucocorticoid, the current standard of care.

While this is only a marginal improvement, a much bigger difference was seen in long-term remission following the treatment. Here, 65.7% of patients who took avacopan sustained remission after 52 weeks, in comparison to 54.9% of the control group.

Additionally, patients taking avacopan reported fewer adverse events than the control group, while also showing improved kidney function and better quality-of-life metrics following treatment. The short story is that avacopan appears to be a significant improvement from the current treatments available.

Current treatment options for ANCA vasculitis

There are around 40,000 patients in the U.S. and 75,000 in Europe diagnosed with ANCA vasculitis. Given the potentially life-threatening nature of the disease, demand remains strong for any treatments that can help improve patients' life expectancy.

This is especially true considering that current treatment options have potentially serious side effects. Glucocorticoids (such as prednisolone) are a common treatment, as they have anti-inflammatory properties, which reduce the damage caused to the body. However, they have significant side effects for ANCA vasculitis patients, such as new-onset diabetes, weight gain, cataracts, high blood pressure, and osteoporosis.

There are some drugs available that have proven effective in treating ANCA vasculitis. One of them is Cytoxan; originally approved as a cancer drug to stop cell growth, it's also been shown to kill the immune cells (neutrophils) that cause the inflammation in ANCA vasculitis. Cytoxan is quite potent, with some data showing a 90% remission rate, but it also has its own set of vicious side effects if used for too long. These include blood in the urine, dizziness, joint pain, shortness of breath, and in some cases yellow eyes and skin.

Considering that avacopan has shown improvements in patients' quality of life following treatment, as well as fewer side effects in comparison to glucocorticoids, the drug could easily become a mainstay treatment for ANCA vasculitis, especially for longer-term usage.

Looking at the financials

As is typical for clinical-stage biotech companies, revenue for ChemoCentryx is pretty low, while overall expenses pushed the company's financials into the red. Revenue for the third quarter of 2019 came in at $10.6 million, a mild improvement from the $9 million in Q3 2018. Net losses grew to $12.9 million in this recent quarter, a modest increase from the $10.9 million reported in the same quarter last year.

What's particularly impressive for ChemoCentryx, however, is that it has $205.8 million in cash and cash equivalents on its balance sheet. This is enough to last the company almost four years at the current rate of expenditure, a very healthy amount for a company of its size.

Other potential milestones

Avacopan has two other phase 2 studies in progress, looking at how the drug affects patients with two separate conditions. The first of which, C3 glomerulopathy, is a broad group of disorders that cause various kidney malfunctions. This includes high levels of protein and blood in the urine, and patients with C3 glomerulopathy often progress to life-threatening end-stage renal disease. The second condition, hidradenitis suppurativa, is when a patient has swollen, painful lumps around the hair roots near one's sweat glands, often in the armpits or groin area.  Keep an eye out for these two studies; if they're successful, they can widen avacopan's scope of use to other related conditions.

ChemoCentryx also has other drug candidates in its pipeline. These include CCX140, a drug targeting rare kidney diseases, which has one phase 2 trial in progress and another recently completed. Other inflammatory and autoimmune disease drugs, CCX507 and CCX587, are still at earlier stages of clinical testing. The company also has some immuno-oncology drugs, with its most promising being CCX872, which is in a phase 2 trial targeting advanced pancreatic cancer.

Should investors consider buying ChemoCentryx?

Now that ChemoCentryx's flagship drug has passed a phase 3 trial with flying colors, investors are right to be enthusiastic about the company. Approval by the U.S. Food and Drug Administration will likely take place sometime in 2020. Should it receive approval, avacopan could be available for purchase in late 2020 or early 2021..

Overall, ChemoCentryx seems like a good investment for a high-growth, high-risk biotech portfolio. You may want to see if prices dip in the upcoming days -- as they often do following these types of biotech surges -- to get the stock at a small discount. Be patient, and wait for the excitement to settle a bit, before buying shares of ChemoCentryx.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.