Shares of ChemoCentryx (CCXI), a mid-cap biopharmaceutical company, fell by a noteworthy 41.2% over the course of 2021, according to data provided by S&P Global Market Intelligence. The drugmaker's shares tanked last year as a result of the protracted regulatory process for its anti-neutrophil cytoplasmic autoantibody (ANCA)-vasculitis medication known as Tavneos (avacopan).
ANCA-vasculitis is an autoimmune disorder characterized by swelling and damage to small blood vessels. The condition reportedly affects approximately 1 out of 50,000 people, with ANCA-vasculitis being most common among middle-aged white men and women.
Although the Food and Drug Administration (FDA) ultimately approved Tavneos on Oct. 8, 2021, the drug's fate was far from certain due to a mixed advisory committee (adcom) meeting earlier in the year. In fact, the drug's target action date was pushed back by several months because ChemoCentryx decided to make a major amendment to its regulatory filing in the wake of this less-than-stellar adcom.
While ChemoCentryx's shares did rebound in a big way in the immediate aftermath of Tavneos' regulatory nod from the FDA, the biopharma's shares have failed to fully recover from their post-adcom tumble. Two key things kept the biopharma's stock from mounting a full recovery.
First, it is fairly normal for early commercial-stage biopharma stocks to revert to the mean, so to speak, following a long awaited regulatory approval. The core reason is that the company now has to prove it can sell the drug in question. As launching a new drug without the help of a big pharma partner is no easy task, investors tend to take a cautious approach with these types of situations. ChemoCentryx, in short, will have to show investors that it is capable of turning Tavneos into a major moneymaker.
Second, Tavneos' approval came at the worst possible time from a share price appreciation standpoint. At the start of the fourth quarter of 2021, small- to mid-cap pharma stocks started to tumble across the board due to concerns over inflation and the threat of rising interest rates.
Is ChemoCentryx's stock a screaming buy after this downturn? The crux of the situation is that Tavneos' commercial launch will likely take a few years to truly gain momentum in the marketplace.
Evaluate Pharma, for instance, doesn't expect the drug to hit $700 million in sales until 2026 at the earliest. Now, a slow ramp for an autoimmune drug isn't abnormal by any stretch. But this promising pharma stock will probably require a hefty dose of patience on the behalf of shareholders. As such, this growth stock is arguably only suited for folks willing to buy and hold for the next four to five years.