Abivax (ABVX +4.16%), a France-based biotech, saw its shares skyrocket by more than 1,740% last year after it made significant progress with its leading pipeline drug candidate, obefazimod. However, the stock may not have peaked yet.
There is a reason to believe the stock could soar another 72% this year.
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A closer look at obefazimod
Obefazimod would be entering a crowded market. It is being developed to treat ulcerative colitis (UC), an area currently dominated by some of the largest pharmaceutical companies. Many current UC therapies work by suppressing part of the body's immune response that causes chronic inflammation. These are effective, but they can also weaken patients' immune systems and increase their risk of other illnesses, especially when used over prolonged periods.
Obefazimod works differently. It is being presented as a UC medicine that can control symptoms of the disease without weakening the body's immune system. In a phase 3 study in patients with moderate to severe UC, the therapy led to statistically significant remission compared to a placebo. Importantly, nearly half (47.3%) of patients in this trial had inadequate responses to prior therapy. So, obefazimod could sidestep some side effects of existing UC drugs while also targeting a broader population of patients than many of the medicines currently on the market.
In other words, the therapy looks very promising and could easily exceed blockbuster status at its peak.
NASDAQ: ABVX
Key Data Points
Why Abivax's stock might soar
Abivax is currently valued at 8.74 billion euros ($10.15 billion). According to some reports, Eli Lilly is preparing a 15 billion euro ($17.42 billion) bid to acquire the company. That would represent a significant 72% premium over its current market cap.
The move makes sense for Eli Lilly, a pharmaceutical giant that is dominating the weight loss market but has been looking to expand its lineup and pipeline through licensing deals and acquisitions. Obefazimod would help Eli Lilly become even more competitive in the immunology market. It's also worth noting that even if Eli Lilly never actually moves forward with an acquisition offer, there is a chance that another pharmaceutical giant will swoop in to acquire Abivax, given obefazimod's prospects.
Is Abivax stock a buy?
So, should investors focused on the long game consider investing in Abivax? Putting the potential acquisition aside, obefazimod's prospects are undeniable, based on the data so far. However, potential clinical or regulatory setbacks could also sink the stock. Even with the strong results it has produced in clinical trials so far, such setbacks can still occur.
In the event of a potential acquisition by Eli Lilly, if it is formally announced, the stock will jump. On the other hand, if no acquisition happens, the stock might lose significant value. My view is that Abivax is somewhat risky, but worth serious consideration for investors with a willingness to ride out some volatility.
