Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of BioCryst Pharmaceuticals (NASDAQ:BCRX), a predominantly clinical-stage biotech company focused on developing novel small molecule drugs to treat varying diseases, scorched higher by as much as 12% in Wednesday's trading session as a continuation move from yesterday's announcement that it had won a contract from the U.S. government to continue its Ebola research.
So what: The announcement, which came from the Biomedical Advanced Research and Development Authority before the opening bell on Tuesday morning, awarded BioCryst a contract worth up to $35 million to continue to develop BCX4430 as a treatment for various RNA-based pathogens, including Ebola.
The contract includes a $12.1 million base fee to support manufacturing for the government, as well as $22.9 million in options that the government can exercise in the future. With the initial $12.1 million payment, BioCryst is expected to focus on improving and scaling up its drug manufacturing process over the next 18 months.
As BioCryst CEO Jon Stonehouse noted in the press release, "BCX4430 currently represents the only single drug that has demonstrated a survival benefit in non-human primates infected Marburg or Ebola viruses."
Now what: The move higher in BioCryst does make sense as it gives the company immediate access to $12.1 million in cash as well as the opportunity to earn $22.9 million more. Based on the $114 million in cash and cash equivalents BioCryst ended fiscal 2014 with, it should give the company approximately an 18-month cash runway based on its own recent estimate of a mid-2016 cash runway.
The initial results from a proof-of-concept study of BCX4430 as a treatment for Ebola were also encouraging. The 16 mg dose in treated animals led to a 67% survival rate at day 41 compared to 0% for the control group, while all six out of six animals survived in the 25 mg intent-to-treat cohort at day 41.
But, on the flipside I'd contend that 10 out of 12 animals is neither a large data pool to make an assessment of success, nor is it a guarantee that this success would translate over into human clinical trials.
With a valuation of more than $700 million BioCryst isn't cheap, and as a vaccine manufacturer it could find itself at the mercy of global governments if they choose not to buy the product (assuming it's eventually approved). I believe that interjects enough doubt into the equation that I would suggest watching BioCryst safely from the sidelines.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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