ChemoCentryx (CCXI) is a leading biopharmaceutical firm that works to discover, develop, and market orally-administered therapeutic drugs to combat many autoimmune disorders, inflammatory diseases, and cancers, with their specialty in orphan and rare disorders.
I am neutral on ChemoCentryx as its strong growth potential, support from Wall Street analysts, and promising pipeline are offset by its lack of profitability and speculative nature. (See Analysts’ Top Stocks on TipRanks)
Strengths
ChemoCentryx focuses on creating therapeutics for rare diseases and cancers that have a distinct advantage over currently marketed therapies, hence, increasing shareholder value.
The company’s lead drug candidate, Avacopan, sold under the brand name TAVNEOS, has been approved by the Food and Drug Administration and introduced commercially in the U.S. market. The drug has also been approved in Japan and received a positive recommendation for approval from the European CHMP.
Recent Results
ChemoCentryx posted revenue of $17.7 million for the third quarter of 2021 compared to the $5.1 million revenue generated in the third quarter of 2020, showing an increase of almost 350%. This was attributed to the $20 million milestone payment from its partner, Vifor Pharma, which has exclusive rights to commercialize TAVNEOS to treat ANCA vasculitis.
The company’s research and development expenses came to a total of $20 million in the third quarter of 2021, compared to the $18.6 million it incurred in the previous year’s quarter. The year-over-year increase was attributed to the manufacture of commercial drug supply in anticipation of TAVNEOS’ launch and an increase in Phase-I-related expenses associated with making the PD-L1 inhibitor, CCX559.
These expenses were partially balanced by lower Phase-II-related expenses, thanks to the completion of the TAVENEOS AURORA Phase 2B clinical trial in patients with Hidradenitissuppurativa.
ChemoCentryx reported general and administrative expenses of $19.6 million for the third quarter compared to $10.4 million in the same period of the previous year. The increase was primarily attributed to higher employee-related costs, including higher professional fees and commercializing planning efforts.
The company posted a net loss of $22.3 million, which was lower than the net loss of $24.1 million incurred in the third quarter of 2020. The company reported cash, cash equivalents, and investments totaling $371.5 million at the end of the quarter.
The company expects to end the fourth quarter of 2021 with cash, cash equivalents, and investments totaling over $360 million.
Valuation Metrics
CCXI stock is very difficult to value as it is not yet generating profits and is a high-growth business. As a result, it is highly speculative in that if the company can successfully develop and sell the products it currently has under research and development, shareholders will likely prosper. If it fails, however, investors are in store for massive losses.
Wall Street’s Take
Turning to Wall Street, ChemoCentryx earns a Strong Buy consensus rating, based on seven Buys and one Hold assigned in the past three months. Additionally, the average ChemoCentryx price target of $66.60 puts the upside potential at 79.5%.
Summary and Conclusion
ChemoCentryx is a high-upside company with a promising pipeline of products under development. Furthermore, Wall Street analysts have clearly bought into the company’s story, with an overwhelmingly bullish sentiment on the stock and a consensus price target that implies massive upside over the next year.
That said, the company is not yet even close to profitability and is not expected to be profitable for the foreseeable future. As a result, it is tough to value here and remains a very speculative investment as steep losses could be in order if the company fails to generate consistently strong profitability.
Investors may want to carefully consider their appetite for risk before buying shares in the company.
Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.
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