Argenx (ARGX -0.44%) is a biotechnology stock that recently shot higher following FDA approval of its first drug. Efgartigimod is now the first drug of its kind approved to treat a debilitating disorder.
Rare drugs can generate blockbuster sales, but first-time drug launches can also be unpredictable. Let's look at reasons to buy Argenx now and weigh them against the apparent risks.
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Reasons to buy Argenx stock now
Argenx's new drug, to be sold under the brand name Vyvgart, could become highly successful as a treatment for certain patients with a debilitating disorder called myasthenia gravis. Patients with this rare disease can lose control of their limbs, voices, facial expressions, and even the ability to breathe or swallow. The root cause is an immune system that produces too many antibodies that jam up signal transmission between nerve endings and voluntary muscles.
Vyvgart is a big deal right now because it's the first new drug out there that inhibits neonatal Fc receptors which in turn lowers circulating AChR. Specifically, the FDA approved it to treat myasthenia gravis patients with high levels of AChR antibodies in their blood.
Soliris from AstraZeneca (AZN 0.99%) is also approved to treat AChR antibody-positive myasthenia gravis patients. The proportion of patients who respond to treatment with Soliris, though, probably isn't as high as Vyvgart. In the pivotal trial that led to its recent approval, 68% of patients treated with Vyvgart showed measurable improvements on the myasthenia gravis activities of daily living (MG-ADL) test compared to just 30% of patients randomized to receive a placebo.
Reasons to remain cautious
Rare disease drugs can generate blockbuster sales, but Vyvgart could end up with a tougher competitor than Soliris in 2022. AstraZeneca also markets Ultomiris, which is essentially a longer-lasting version of Soliris. Myasthenia gravis patients who received Ultomiris also showed significant improvements on the MG-ADL test in a recent phase 3 trial.
The percentage of patients who showed meaningful improvements on the MG-ADL test wasn't significantly higher for patients randomized to receive Ultomiris compared to placebo. The average improvement measured, though, was significantly better for the Ultomiris group.
Maintenance treatment with Vyvgart requires four infusions every eight weeks, which is a similar burden compared to Solaris. In the successful phase 3 trial with Ultomiris, myasthenia gravis patients received one maintenance dose every eight weeks.
Infusions aren't just expensive to administer, they expose patients to dangerous infections that they're usually not well equipped to fight off. With a clear benefit in terms of average improvements measured, Argenx's upcoming competition with AstraZeneca could become an insurmountable challenge.
At recent prices, Argenyx's market cap is a stunning $15.9 billion. That means investors are expecting AstraZeneca to just sit back while Vyvgart goes on to generate more than $1 billion in annual sales before 2025. Anything less could lead to heavy losses for investors who buy the stock at its currently inflated valuation.
A buy now?
Vyvgart is in phase 3 trials for additional indications and a more convenient injectable version is also in late-stage testing. Beyond Vyvgart, though, Argenx doesn't have any other candidates in late-stage clinical trials yet.
Talented salespeople who can confidently explain to physicians why Vyvgart could be a better option than AstraZeneca's drugs were hard to find before the pandemic began. If Argenyx can't assemble a new salesforce with enough experience to get the job done, buying this biotech stock now could lead to heavy losses in 2022.
It isn't impossible for a first new drug launch to enjoy incredible success in the face of challenges like those Argenyx is facing. Without much potential for further upside, though, it probably isn't a bet worth taking right now.
