Please ensure Javascript is enabled for purposes of website accessibility

Is Acceleron Pharma Stock a Buy?

By David Haen - Updated Feb 4, 2020 at 12:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock's price surged following a clinical trial success, but should investors now temper their enthusiasm?

Last week, Acceleron Pharma (XLRN) announced positive clinical trial results for its drug to treat a type of high blood pressure, causing its stock to skyrocket over 75%. After a jump that big, investors need to determine if the stock still has room to grow.

Syringe pulling medicine from a vial

Image source: Getty Images.

What happened?

Acceleron reported that its drug sotatercept successfully met the primary and secondary endpoints in a phase 2 clinical trial treating patients with pulmonary arterial hypertension (PAH). According to the American Lung Association, PAH occurs when small blood vessels in the lungs narrow in diameter, impeding blood flow through the lungs. It can lead to heart damage. Acceleron believes approximately 80,000 patients in the United States and Europe live with PAH. This program remains the most advanced of Acceleron's internal R&D efforts.

A little history

To understand Acceleron, an investor needs to look back into its history, particularly its longstanding relationship with Celgene, now part of Bristol-Myers Squibb. Sotatercept, the drug with the recent positive PAH results, was the focus of a pact between the two companies forged in February 2008. Celgene paid Acceleron $45 million initially and bought $5 million of Acceleron's stock. Celgene also gained options on additional molecules being developed.

The companies subsequently amended the agreement in 2011 and again in 2017, the latest version giving Acceleron the rights to sotatercept for pulmonary hypertension, including PAH, while Celgene maintained rights to all other disease indications. Over the years, Celgene paid $44.6 million in R&D expenses related to the program. Initially, the companies sought to develop the drug for cancer-related bone loss.  

Celgene expanded its relationship with Acceleron by acquiring the rights to a second drug called luspatercept. This drug rapidly took center stage for Celgene. The company quickly advanced the drug through clinical trials and, last November, gained approval from the Food and Drug Administration (FDA) for the treatment of anemia in patients with the disease beta thalassemia. It marked the first-ever FDA-approved treatment for those patients. According to the federal Centers for Disease Control and Prevention, more than 1,000 Americans have beta thalassemia, a genetic blood disease which hinders the blood's ability to produce the oxygen-carrying protein hemoglobin.

In addition, Celgene applied for approval for the drug as a treatment for myelodysplastic syndromes (MDS), a group of closely related blood cancers. The American Cancer Society estimates MDS may affect 10,000 or more people in the United States. The FDA informed Bristol-Myers that it would not require the drug to be reviewed by the Oncologic Drugs Advisory Committee. The FDA's deadline to make its decision under the Prescription Drug User Fee Act, or PDUFA, is April 4. A second approval may provide upside in the stock.

The FDA's approval of luspatercept for anemia in beta thalassemia triggered a $35 million payment to Acceleron. An approval in the next few months for MDS could prompt another sizable milestone payment from Bristol-Myers Squibb. Furthermore, BMS continues to invest in the program running additional clinical trials for other blood diseases.

What next?

While the latest phase 2 clinical trial data in PAH demonstrate that sotatercept can outperform placebo, it still needs to be evaluated in a larger phase 3 clinical trial. Of note, the patients in the phase 2 trial continued to receive other available PAH treatments. This means sotatercept can be added on top of existing treatment regimens to improve benefit for patients. Why is this important? It may eliminate the need to run a head-to-head clinical trial between sotatercept and existing drugs. Instead, a pivotal trial may compare sotatercept to placebo, a less risky endeavor, in patients already receiving existing medications.

Acceleron expects to present the data at a major medical meeting later this year. Until then, we only know that clinical trial endpoints were achieved. Seeing more granular data should shine light on the degree of benefit and safety.

With more than 90% of the stock in the hands of institutional investors, Acceleron could see some profit-taking in the near-term. I am inclined to think that many of these investors will hold the stock to see the FDA's approval decision in early April. Even at $93, some analysts see the price going higher; Citibank, for instance, raised its price target to $138.

Biotech investors should consider buying this stock to participate in any moves due to the pending approval and the detailed release of the PAH trial results. Acceleron's partner Bristol-Myers Squibb also provides a formidable force to commercialize luspatercept.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Acceleron Pharma Stock Quote
Acceleron Pharma
XLRN
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$76.84 (-0.21%) $0.16
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$46.87 (1.91%) $0.88

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.