Deciphera Pharmaceuticals (NASDAQ:DCPH), a biopharmaceutical company based in Waltham, Mass., received a double shot of good news last week ... and has been climbing ever since.
As of midday Friday, the biopharma's stock is now nearly $8 higher than it was at the end of the previous week -- about a 15% jump, thanks to good news from the U.S. Food and Drug Administration (FDA) regarding its drug ripretinib, marketed under the name Qinlock.
First, the FDA approved Qinlock as the first fourth-line treatment for gastrointestinal stromal tumors (GISTs) and gave it Fast Track, Breakthrough Therapy, and Orphan Drug status. That news came shortly after the FDA knocked down one of Deciphera's competitors in the process, issuing a complete response letter denying GIST therapy candidate avapritinib, from Blueprint Medicines (NASDAQ:BPMC).
No sense in waiting
Deciphera is moving to launch Qinlock this week. Analysts predict it could be worth as much as $1.6 billion in revenue this year.
As of March 31, Deciphera already had $691.5 million in cash, cash equivalents, and marketable securities, which the company said was enough to fund operating and capital expenditures through the second half of 2022. With Qinlock on the way and several other drugs in its pipeline, the company will have no difficulty getting more funding. For the present, Qinlock will be used only on fourth-line patients, whose cancers have proven resistant to other treatments. In the future, the company sees Qinlock being approved for second-line treatment and taking market share from sunitinib, which is marketed as Sutent by Pfizer (NYSE:PFE).
"With [Qinlock's] phase 1 looking better than sunitinib, it has a good chance of replacing sunitinib as the standard of care," Deciphera chief business officer Chris Morl said in January.
Another promising drug the company is developing is rebastinib. In one phase 1b/2 clinical study, it's being combined with paclitaxel to treat solid tumors in breast, ovarian, and endometrial cancer. In another 1b/2 clinical study, it's being combined with carboplatin to reduce solid tumors from mesothelioma, as well as ovarian and breast cancer.
A third drug, DCC-3014, is in phase 1 trials against advanced malignancies and tenosynovial giant cell tumors (a rare kind of tumor that forms in the joints).
Slowing down to take a look at the risks
From a pure bottom-line standpoint, Deciphera is still losing money. It reported a net loss of $72.8 million, or $1.36 per share, in the first quarter, compared with a net loss of $47.4 million, or $1.25 a share, in the same quarter in 2019. That will quickly change, however, as the company is already marketing Qinlock.
Analysts seem pretty bullish on the stock, with a typical target of $70. That leaves a lot of room from its current price in the high $50s.
That's because the biggest risk, that Qinlock would not be approved, has already been eliminated. The types of GIST cancers that it would be used on are rare, and while the incidence of GIST is low -- affecting as few as 1% of all people who develop gastrointestinal tumors -- the company would likely be able to charge $30,000 or more for a month's supply. There are few competitors, and the price point for targeted oncology drugs is high.
Still, like any clinical-stage biopharma, it's riskier than buying stock in an established mainline pharmaceutical stock. A lot is riding on Qinlock, with not much to fall back on if the drug doesn't succeed in the market.
On the plus side, Deciphera is all about growth. If you're willing to take the risk, there may be a huge upside.