Shares of the highly popular biotech stock ChemoCentryx (CCXI) ticked up a few notches after a Wall Street analyst upgraded the stock to buy. Stifel analyst Dae Gon Ha thinks a recent development regarding the clinical-stage biotech's lead candidate is a pretty big deal that the rest of the stock market has mostly overlooked.

Does recent receptivity from the Food and Drug Administration make ChemoCentryx a good stock to buy now, or is there another heartbreak on the horizon? Let's compare the good news to the bad to find out.

Scientists consulting in a laboratory.

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Reasons to buy ChemoCentryx now

The complement system is the part of your immune system that recognizes and removes foreign objects -- and it's not a fun way to make new friends. For patients with severe autoimmune disorders like antineutrophil cytoplasmic antibody (ANCA)-associated vasculitis, too much complement system activity can permanently damage small blood vessels, and the organs they feed.

ChemoCentryx's lead candidate, avacopan, is an easy-to-swallow pill that inhibits the C5a receptor, the complement system's linchpin, to prevent out-of-control inflammation. The FDA is currently reviewing an application to treat antineutrophil cytoplasmic antibody (ANCA)-associated vasculitis with avacopan.

Alexion Pharmaceuticals' (ALXN) Soliris and Ultomiris are highly successful C5 inhibitors, but neither is specifically approved to treat ANCA vasculitis patients. However, they're both antibody treatments administered intravenously. Since complement-mediated autoimmune disorders require lifelong immunosuppressive treatment, reducing reliance on intravenous infusions could be a huge advantage for ChemoCentryx down the road.

Eventual expansions to treat additional complement-mediated disorders like Alexion's drugs could make this stock a big winner for patient investors. In the first quarter, sales of Soliris and Ultomiris reached an annualized $5.5 billion.

Patients with ANCA-associated vasculitis currently rely on old steroids like prednisone to keep inflammation in check. While cheap steroids are effective, their side effects are a huge problem. With over 100,000 ANCA vasculitis patients in the U.S. and Europe, approval to treat this underserved population could push annual sales of avacopan up to a peak of around $1 billion.

A scientist examines two test tubes as another scientist in the background looks into a microscope.

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Reasons to remain cautious

In May, ChemoCentryx stock tanked when the FDA's independent advisory committee expressed mixed feelings about the company's new drug application. The company has put additional data and information in front of the agency, addressing issues that prevented half the panel from giving avacopan its endorsement. The company hasn't shared many details regarding the new additions, so it's hard to evaluate their potential effects on the FDA's upcoming decision.

Instead of delivering the approval decision investors were expecting this month, the FDA agreed to incorporate the new information into the ongoing review process. Major amendments have a tendency to result in eventual approvals, but there's still a very real chance the FDA could delay avacopan's launch indefinitely.

ChemoCentryx is still a loss-reporting start-up without any products to sell. At the moment, avacopan is the only new drug candidate the company has in clinical trials. With nothing to fall back on, a negative decision from the FDA this fall could lead to heavy losses that investors never recover.

Looking ahead

The FDA is expected to announce its decision on or before Oct. 7, and I'll be surprised if ChemoCentryx doesn't receive a green light to market avacopan. During the pivotal Advocate study, 72.3% of patients treated with avacopan achieved clinical remission, compared to 70.1% of patients who received prednisone. With such a slim advantage on this primary endpoint, the committee's hesitancy to release a new drug into the world was probably warranted.

But in the 163-page briefing document that the FDA sent independent experts this May, it looks like the agency wants the committee to read between the lines. In a nutshell, the top-line data for avacopan doesn't tell the whole story. Once you consider the harm that comes from giving patients prednisone for the rest of their lives, avacopan's approval seems imminent. Investors may want to tread very lightly around this risky biotech stock, but at the moment it looks like a good one to buy.