Last year, shares of Abivax (ABVX 1.39%), a clinical-stage biotech company based in France, soared after it reported strong phase 3 results for its leading candidate, obefazimod, an investigational medicine for moderate-to-severe ulcerative colitis (UC). The company still had to wait for data from a maintenance study before seeking approval. Investors anxiously awaiting that development sent the stock price even higher in the meantime. However, Abivax recently reported somewhat disappointing data from this maintenance trial. The stock fell off a cliff as a result. Abivax's shares are still up about 1,000% over the past 12 months, but can the company deliver excellent returns from here on out?
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Worrying safety signals
Let's start with what makes obefazimod so promising. While several immunosuppressants are highly effective at treating UC, because they weaken the body's immune system, they increase the risk of viral and bacterial infections. Obefazimod is being touted as a UC therapy that is not an immunosuppressant. It could prove highly effective while avoiding the traditional drawbacks of many of its competitors. Abivax provided evidence that obefazimod can achieve that goal in a phase 3 induction study.
Patients with moderate-to-severe UC taking obefazimod achieved significantly higher clinical remission rates than those taking a placebo. Importantly, 47.3% of the patients in the study had taken UC medicines before, but with little success. So, obefazimod seemed highly effective in this induction trial. And it is also an oral pill, whereas many existing UC drugs are administered via subcutaneous injection. So far so good. Abivax's recent results from a much longer maintenance trial (to see whether clinical remission is sustained) extended these efficacy results.
However, it also came with serious questions about safety. Abivax noted that there were several cases of cancer (including breast, prostate, and colon), mostly in the group of patients who took the highest dose of the medicine. Despite the drug's unquestionable efficacy, investors are now wondering whether it can capture a decent share of the UC market, given potential safety concerns, especially since one of obefazimod's selling points was its better safety profile compared to traditional immunosuppressants.
NASDAQ: ABVX
Key Data Points
Is Abivax stock a buy?
Abivax plans to submit an application to regulatory authorities for obefazimod in UC by year-end. It is also running a phase 2 study for its crown jewel in Crohn's disease, with expected data readouts in mid-2027. After its mixed phase 3 data readout for obefazimod that sent the stock off a cliff, Abivax is worth 4.99 billion euros (about $5.8 billion). That's still fairly high for a clinical-stage biotech company that is likely more than a year away from launching its leading product. But what if the market is overreacting to the safety concerns in the obefazimod maintenance study?
Digging deeper into the data suggests that might be the case. Abivax separated the cancer cases into two groups: Non-Melanoma Skin Cancers (NMSC) and others. The cases in the second group, that is, those who developed cancers other than NMSC, were deemed by investigators to be unrelated to obefazimod. Among the four patients on the highest dose of the medicine during the trial who developed NMSC, two were judged unlikely to be linked to obefazimod, while one of the remaining two already had a history of skin cancer.
Further, the mean age of patients who developed NMSC during the study was 62, compared with 42 for the entire trial population. Patients with UC are already known to be more likely to end up with NMSC, and the risk is even higher for older people. So, obefazimod's safety issues may not be all that bad. Meanwhile, Abivax's crown jewel still has significant opportunities in a UC market typically dominated by pharmaceutical giants, given its strong efficacy in both induction and maintenance, as well as its convenient oral formulation.
And that's before we factor in the company's work on Crohn's disease. My view is that Abivax's prospects remain attractive, especially after its meltdown. However, significant risks remain, as additional clinical or regulatory setbacks will further sink the stock. Investors should remember that before initiating a position, and only do so if they are comfortable with volatility.
