The general market action matters little to biotech stocks. The potential for massive gains – or losses – lies with company-specific news flow, such as positive/negative updates from clinical studies or regulatory developments.
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In the case of Kala Pharmaceuticals (KALA), its latest update drew plenty of applause from investors. As the major indexes took a further beating on Wednesday, KALA shares saw out the session up by 218% after the company announced that the IND (investigational new drug) application for its lead product candidate KPI-012, indicated to treat persistent corneal epithelial defect (PCED), had been accepted by the FDA.
The company expects to initiate the Phase 2b study in 1Q23, with topline data anticipated in 1Q24.
PCED is a complication that can occur because of a corneal injury that does not heal properly. In the Phase 1b trial, total healing of corneal defects as measured by corneal staining was the primary efficacy endpoint. Seven of the eight evaluable patients saw improvement, with six of the eight attaining full healing after 4 weeks. The six healed patients remained so until the end of the follow-up period.
“In our view,” says H.C. Wainwright’s Yi Chen, “these results are very promising for PCED patients who have little treatment options. Notably, the FDA has granted Orphan Drug designation to KPI-012 for the treatment of PCED.”
The acceptance of the IND application means the company has received the remaining $25 million (out of $31 million in total) in investment according to the terms of the private placement financing announced at the end of last month. Combined with the current cash on hand, management anticipates it has enough capital to last until 1Q25.
All told, Chen sticks with a Buy rating for KALA shares along with a $12 price target. However, following Wednesday’s huge gains, the stock has now surpassed that target. It will be interesting to see whether Chen updates his model shortly. (To watch Chen’s track record, click here)
It’s all rather quiet on the KALA analyst front. Over the past 3 months, one other analyst has chimed in with a review, which is also positive, providing the stock with a Moderate Buy consensus rating. With the extra review anticipating further gains, the $29.5 average price target allows for returns of 136% over the coming year. (See KALA stock forecast on TipRanks)
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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.
