If you're looking for stocks that can make dramatic moves to the upside in a short amount of time, the biopharmaceutical industry has you covered. Over the past month, shares of Chinook Therapeutics (KDNY) and Vera Therapeutics (VERA 2.48%) have rocketed 78% and 74% higher, respectively.
Both of these biotech stocks have a chance to deliver further gains but there are no guarantees. Here's what everyday investors should know before betting that these two will climb even higher than they already have.
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Chinook Therapeutics
Shares of Chinook Therapeutics are up 77% over the past month because, on June 12, Novartis agreed to buy the clinical-stage drug developer for $3.2 billion in cash, or $40 per share.
As is usually the case following buyout offers, Chinook's current stock price is significantly below the offered price because there's a slight chance government regulators will attempt to block the sale.
Chinook's lead candidate, atrasentan, is an endothelin A receptor antagonist that could reduce kidney damage for patients with immunoglobulin A (IgA) nephropathy and related disorders including paroxysmal nocturnal hemoglobinuria (PNH). Novartis is already developing a new treatment for IgA and PNH called iptacopan.
In the not-so-distant past, few would expect regulators to step in because iptacopan and atrasentan are still in the experimental stage, plus they act on different targets. Before investors get too comfortable with Chinook, they should know that the U.S. Federal Trade Commission has expanded its scope in recent years to include concerns about anticompetitive effects biotech buyouts can have on drugs that are years away from earning marketing approval.
In addition to a slight bump that could happen soon if the deal completes without antitrust drama, Chinook shareholders could also receive a $2-per-share bonus down the road if atrasentan earns approval to treat IgA, and another $2 if it succeeds as a treatment for focal segmental glomerulosclerosis. I think there's a strong chance the deal will move forward, but eventual Food and Drug Administration (FDA) approvals are much harder to predict.
Vera Therapeutics
Shares of Vera Therapeutics rose 74% over the past month partly in response to Novartis' actions. Chinook's second-most advanced clinical-stage drug candidate, zigakibart, inhibits APRIL, a small protein that plays a role in inflammation.
Vera's lead candidate, atacicept, is an inhibitor of APRIL and a second protein. Its two-pronged approach appears to do the trick for patients with IgA nephropathy. The candidate recently reduced signs of kidney damage (proteinuria) for patients with IgA in the phase 2 Origin trial. Specifically, it reduced the amount of protein leaking into patients' urine, a hallmark of kidney damage, by 40% while patients randomized to receive a placebo worsened.
IgA nephropathy is considered a rare disease, but it still affects over 100,000 Americans. Nearly half will progress to end-stage kidney disease and require dialysis or a transplant. These combined factors mean global sales of related therapies could top out at more than $6 billion annually.
With a modest market cap of $570 million, Vera Therapeutics looks like an acquisition target for another deep-pocketed pharmaceutical company that wants to bolster its development pipeline. Unfortunately, Vera didn't discover atacicept itself and the company still owes its owner royalties at a low-double-digit percentage if it earns approval.
Vera Therapeutics would be a far more attractive acquisition target if it owned atacicept outright. That said, this stock still has a chance to soar much further if atacicept continues producing data that appears competitive with a slew of experimental new treatments aimed at IgA nephropathy and related disorders.
Investors should know that Vera Therapeutics finished March with just $209 million in cash after burning through $102 million over the past 12 months. Without a big pharma partner to pay for late-stage clinical trials losses will most likely accelerate. Don't be surprised if the company needs to raise capital again in 2024.
Further success with atacicept could make this stock soar a lot further than it already has. Anything less than a rousing success in upcoming clinical trial results could also lead to heavy losses. It's probably best to tread lightly with this stock until there is more data for the drugs it's developing.
