Biotech stocks are known for their wild ways. Over the last few years, for instance, we have witnessed dozens of small-cap companies soar -- as well as sink -- following pivotal clinical or regulatory catalysts.
Perhaps one of the most intriguing aspects of this phenomenon is that the biggest moves tend to occur in under-the-radar biotechs. Before skyrocketing by over 300% in just two days last year, for example, Intercept Pharmaceuticals was known only to a handful of analysts and investors. And similar cases could be made for the cancer drugmaker InterMune and gene therapy company bluebird bio prior to their huge moves upwards.
That's why I find the case for Celladon Corporation (NASDAQ:EIGR) particularly intriguing. This small-cap cardiovascular gene therapy company is expected to release mid-stage results for its flagship heart failure treatment, Mydicar, next month. And despite the therapy's initial indication for systolic heart failure estimated to generate peak sales in excess of $1.5 billion by 2025, the stock has attracted little attention from the broader market.
Celladon shares, though, have been heating up over the past few days, with the stock jumping nearly 35%.
With this in mind, let's consider if this high-risk, high-reward biotech is worth a deeper look ahead of this forthcoming data readout for Mydicar.
Mydicar could be a game-changing cardiovascular gene therapy
Mydicar is a gene therapy that targets the SERCA2a enzyme deficiency in patients suffering from heart failure. Given that SERCA2a levels have been shown to be strongly correlated with heart function in terms of the amount of blood it can pump, this enzyme has become a prominent therapeutic target in gene therapy studies.
The basic idea is to use gene therapies such as Mydicar to restore SERCA2a enzyme levels to normal, which should, in turn, result in fewer hospitalizations and deaths stemming from this devastating disease. As there are no curative treatments for heart failure and the currently approved drugs are used only to alleviate symptoms, Mydicar is, without question, a potential game-changer.
That's why the Food and Drug Administration granted Mydicar the coveted breakthrough therapy designation last April, meaning that it could be approved early based on the upcoming mid-stage results. And indeed, Celladon has already begun ramping up production levels to support a commercial launch in the near future.
How risky is this clinical-stage biotech?
This pending data readout is going to be a make-or-break moment for Celladon, given that its entire platform is based on Mydicar's technology that has taken approximately 20 years to develop. But there are some fairly strong reasons to be optimistic going forward.
First off, the mid-stage trial in question, dubbed CUPID-2, is largely a scaled up version of an earlier trial (CUPID-1) that was stunningly successful in several respects. Chief among them, the 39 patient CUPID-1 trial showed that Mydicar treatment led to significantly lower rates of hospitalizations and deaths, even three years after treatment, when compared to patients receiving placebo. Another key finding was that patients receiving Mydicar experienced no negative side effects over the three-year follow-up period.
According to the company, the CUPID-2 trial is highly similar in terms of patient demographics, but employs a much larger sample size (250 patients is the target enrollment). The really interesting part about the study's design, though, is that it's set up to have a huge buffer from missing the primary endpoint of reducing heart-related hospitalizations. Simply put, the observed treatment effect in CUPID-1 would have to fall by more than 50% for the current study to fail.
Is Celladon worth the risk?
It's rare for me to endorse an all-or-nothing type biotech stock like Celladon. But the company's jaw-dropping value proposition is simply hard to ignore ($589 million market cap vs. peak Mydicar sales that should easily reach into the multi-billion dollar range), and eerily reminiscent of the arrival of bluebird's blood disease gene therapy LentiGlobin.
My take is that Celladon's shares have been ignored by the market because gene therapies have repeatedly disappointed investors for several decades at this point, making this field a high-risk proposition in general. Indeed, bluebird's therapy was among the first to demonstrate a significant clinical benefit to patients, without resulting in crippling adverse effects or death due to off-site toxicities.
My hunch (and it's only a hunch) is that Mydicar will follow in LentiGlobin's footsteps, helping to usher in a new era for next-generation gene therapies. That's why I am closely eyeballing this stock ahead of this top-line data release and seriously considering taking a position.