BioCryst: Sometimes Good News Isn’t Good Enough

Shares of BioCryst Pharmaceuticals (BCRX) slumped nearly 17% this week. That’s kind of surprising, considering that the company released positive data on its paroxysmal nocturnal hemoglobinuria (a rare blood disease that can cause anemia, blood clots, and impaired bone marrow function) inhibitor, BCX9930. According to the company, the latest data show that the drug “was safe and generally well-tolerated” in clinical trials, and “significantly increased hemoglobin and reduced transfusions in an ongoing dose-ranging trial.”

And yet, as RBC Capital analyst Brian Abrahams explains, good is not always quite good enough.

“On the positive side,” Abrahams noted, “the results look generally consistent with prior data, there were no new safety red flags, and there remain clear effects even in the treatment-experienced population — all of which support progressing the program into later-stage studies. On the less positive side, the data do not look materially better” than seen in previous data, despite BioCryst upping the dosage in its latest trials.

Worse, Abrahams observes that the drug’s effectiveness at lowering levels of Lactate DeHydrogenase (LDH) is questionable, and does not quite appear to meet target levels. This is problematic because there’s a need for a drug that can demonstrate “durable control of hemolysis” (rupturing of red blood cells) — and this hasn’t yet been conclusively demonstrated.

Ultimately, Abrahams concludes that BCX9930 “continues to look viable,” but the new data just isn’t good enough to justify raising the analyst’s rating on BioCryst stock higher than “neutral” — especially not after the stock had run up more than 260% in the six months leading up to today’s press release.

Luckily for BioCryst investors, BCX9930 isn’t the only arrow the company has in its quiver, and not the only argument in favor of owning the stock. Abrahams actually put greater emphasis on the company’s “Orladeyo opportunity.” Orladeyo is a prescription medicine used to prevent attacks of Hereditary AngioEdema (HAE, a disease that causes swelling of the skin and mucous membranes) in adults and children age 12 and older.

Abrahams sees Orladeyo as potentially generating near-term U.S. sales in the neighborhood of $49 million, rising to perhaps $300 million by 2026, citing physician commentary calling the drug “a very good option for milder patients.” The analyst particularly likes the fact that Orladeyo is an oral prophylactic, which may make it more attractive to HAE patients willing to try a new treatment. He further notes that competing HAE drugs are already doing $500 million or more in annual sales, which suggests a $300 million sales target shouldn’t be out of reach.

To this end, Abrahams rates BCRX a Sector Perform (i.e. Hold). At $11.80 even after this week’s selloff, BioCryst shares are still 31% overpriced relative to Abrahams’ $9 price target. (To watch Abrahams’ track record, click here)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.