What happened
Shares of the central nervous system drug specialist Cortexyme (CRTX 1.30%) plummeted by a hefty 54% over the course of 2021, according to data provided by S&P Global Market Intelligence. The clinical-stage drugmaker's shares imploded last year in response to the failure of its lead Alzheimer's disease candidate atuzaginstat in a combined phase 2/3 study.
Specifically, atuzaginstat reportedly missed both of its co-primary endpoints in the phase 2/3 Gain trial as a treatment for mild to moderate forms of Alzheimer's disease. However, the drug, which targets a bacterial infection in the brain of Alzheimer's disease patients, did show a promising dose-dependent response among individuals who tested positive for Porphyromonas gingivalis, a bacteria that causes the gum disease periodontitis.
Image source: Getty Images.
So what
Since announcing these disappointing trial results late last year, Cortexyme has said that it plans to trial the drug yet again. This time, however, the study will focus exclusively on Alzheimer's disease patients with active P. gingivalis infections. The company plans on discussing the trial's design with regulators sometime in the first-quarter of 2022, according to a recent corporate update. So, if everything goes according to plan, investors can probably expect top-line results from this next trial in the second half of 2024.
The one potential hiccup is that Cortexyme only had about $140 million in cash and cash equivalents at last count. That amount ought to be enough to get this all-important confirmatory trial underway. But it probably isn't sufficient to see the company all the way through a regulatory filing -- assuming atuzaginstat hits the mark this time around. In other words, Cortexyme will likely have to tap the public markets for capital at some point within the next 12 to 16 months.
Now what
Is Cortexyme stock worth owning in 2022? There are two compelling sides to this argument.
On the one hand, Alzheimer's disease drugs can be a veritable gold mine for their manufacturers. An effective disease-modifying drug, after all, is thought to be worth upwards of $20 billion a year in sales.
Therefore, atuzaginstat should have no problem achieving at least $1 billion in annual sales if approved -- even as a treatment limited to patients with active P. gingivalis infections. That's a sizable chunk of change for a small-cap biopharma currently valued at $347 million.
On the flip side, Alzheimer's disease has proven to be an especially tough nut to crack for biopharma in general. So the potential for another clinical failure for atuzaginstat shouldn't be discounted by aggressive growth investors.
All told, Cortexyme's stock certainly sports a healthy upside potential. But the equity's inherent risks ought to be taken into account before buying shares.
