If you're looking for stocks that can make dramatic movements in a short time frame, the biotechnology space has what you crave. At the end of June, ProKidney (PROK -3.42%) stock was languishing at less than $1 per share. When the market closed on July 10, the stock was trading at $5.18 per share. That's a 775% gain in 10 short days.
ProKidney stock has declined somewhat from the peak it reached on July 10, but it's still way up. Here's a look at the encouraging news that drove the stock through the roof, and a glance at if it's a smart buy now.
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Why ProKidney stock spiked
An estimated 37 million adults in the U.S. have chronic kidney disease (CKD), a progressive condition characterized by gradually declining kidney function. ProKidney's lead candidate, rilparencel, is aimed at folks with late-stage CKD, which represents between 1 million and 2 million Americans.
On July 8, ProKidney announced the results of the phase 2 Regen-007 trial with its lead candidate rilparencel. This experimental treatment is manufactured in batches of one out of cells extracted from each patient's kidneys. The company expands a population of select kidney cells known to play a role in repairing and restoring kidney function before reinjecting them into CKD patients.
Treatment with rilparencel stabilized kidney function as measured by the annual decline in patients' glomerular filtration rate (eGFR). The eGFR decline for folks randomized to receive two rilparencel injections, one in each kidney, was 78% slower than the placebo group. This suggests the treatment can dramatically lower patients' risk of progression to kidney failure and reduce their need for dialysis and transplantation.
Dialysis isn't cheap, and monitoring transplants for rejection is another pricey activity that insurance companies would rather avoid. With this in mind, expecting heaps of demand for a therapy that prevents CKD patients from worsening isn't unreasonable.
Know the risks
It's going to be about a year before we have a concrete timeline for when ProKidney could begin commercializing rilparencel. The company has already started enrolling advanced-stage CKD patients in a phase 3 trial, but the initial readout isn't expected until 2026.
Treatment with rilparencel lowered the rate of CKD progression for advanced-stage patients who received two doses, but the study protocol included a second group that didn't perform as well. In a group designated to receive a single rilparencel injection followed by a second dose if kidney function worsened, the annual rate of eGFR decline was 50% lower than the placebo group.
A 50% reduction in patients' rate of eGFR decline seems like a big deal, but there were only 25 patients in the group. The difference measured wasn't strong enough to be considered statistically significant.
In ProKidney's ongoing phase 3 Proact 1 trial, which is also confusingly named Regen-006, hundreds of patients randomized to receive rilparencel will be given a dose in each kidney. Recently reported results from the small phase 2 Regn-007 trial suggest the larger phase 3 study can succeed too, but this is a long way from guaranteed.
What's next for ProKidney?
Management recently met with regulators at the Food and Drug Administration (FDA) regarding rilparencel's path to approval and reported great news. Instead of waiting for years to measure how long it takes patients' kidneys to fail, the FDA will accept a significantly improved rate of eGFR decline as a surrogate endpoint. This means the company could have an application package ready to submit to the FDA before the end of next year.
Anyone who invests in this industry should understand the FDA, as a rule, never issues comments to the public regarding private meetings with drugmakers. If ProKidney is grossly mischaracterizing regulators' regard for eGFR rates as a surrogate endpoint, we can't expect anybody at the agency to tell us otherwise.
Is the stock a buy now?
At the closing bell on July 18, ProKidney's market cap was a very small $408 million. That's a low valuation for a drugmaker that could be a couple of years away from launching a treatment for more than a million underserved Americans. If the phase 3 results that are expected next year confirm the positive result we saw in phase 2, this stock could rocket higher.
Investors probably don't need to worry about this precommercial business running out of resources before it has a chance to shine again. ProKidney finished March with $328.5 million in cash on its balance sheet after burning through $38 million in the first three months of the year.
However, investors should understand there is still a lot that can go wrong for rilparencel before it becomes a viable commercial-stage product. For investors who can tolerate extreme risk, making a relatively small bet on this stock now probably isn't a bad idea.
