3 BIOTECH CATALYSTS FOR A BLAZING HOT SUMMER

By Owen Marino, Biotech Analyst

In the world of biotech, a company’s fortunes can change seemingly at the drop of a hat. The success of these startups, where many are putting all their eggs into the basket of a single revolutionary product, are constantly at the mercy of regulatory authorities such as the FDA. A single event such as the announcement of a product or results of a round of testing can drive stocks up or down exponentially, in the worst case scenario causing some companies’ stocks to lose well over half their value in a single morning. It is essential for any informed investor to understand stock catalysts – these events that have the potential to spur a jump in stock price – and to use them to their advantage in equity investing.

As we move towards the dog days of summer and the worst effects of the COVID-19 pandemic begin to fade into the rear view mirror, a few early-stage biotech companies in particular have upcoming events that investors should be aware of as potential catalysts for a big swing in the price of these stocks. Doing your research can pay off if you buy early and positive news about a company causes its stock to blast off. Buyers should keep their eyes on these three events in between their beach visits and post-COVID get-togethers this summer:

1). 4D Pharma ($LBPS)

The first of these stocks to watch is 4D Pharma (NASDAQ: LBPS), which is scheduled to be a lead presenter at the Microbiome Movement Drug Development Summit this upcoming Thursday, July 1. The Leeds, United Kingdom-based startup focuses specifically on the use of Live Biotherapeutic products, or LBPs, to treat different diseases. LBPs contain live microorganisms, commonly referred to as probiotics, that aid the body’s immune system in fighting and preventing a number of conditions. Organisms such as bacteria and yeasts that are naturally found in human beings are essential for things such as gastrointestinal and skin health, and are now being studied more heavily by companies such as 4D for their preventative benefits. The company, regarded as a pioneer in the field of biotherapeutic development, has a number of treatments that have already been approved for clinical testing, and it recently announced a partnership with non-profit organization Parkinson’s UK for the development of treatments related to conditions of the Central Nervous System. Among 4D Pharma’s promising developments, which are all created at its own independent cGMP-certified lab, are a phase I/II studies of MRx0518 for pancreatic tumors, a phase I/II study of MRx-4DP0004 for patients with asthma, and a remedy for IBS that has completed two stages of clinical trials. The company’s treatment for pancreatic cancer, which is being tested in collaboration with immunotherapy medication Keytruda, is currently seen as its most promising for successful approval in the coming months. Using samples of gut bacteria isolated from healthy human donors, the drug has shown effectiveness in late stage cancer patients to reverse failures in the protein PD-L1, which acts as an immune system “brake”, in order to prevent the body from killing off healthy cells in an effort to destroy cancerous ones. “In our initial population of 12 patients with growing tumors, some of whom had received seven or eight different prior treatments, five had durable responses to MRx0518 in combination with Keytruda,” said CEO Duncan Peyton in October 2020 when discussing the treatment’s potential. “That was a fantastic result and we’re excited to conduct later stage trials, with an approval next year potentially on the cards.” The company, to be represented this Thursday by development director Christophe Carite, will have a chance to share its upcoming strategies to expand production and address questions about its pipeline process at a subsequent microbiome manufacturing Q&A panel. Investors should keep an eye on this week’s event as a way to gauge the company’s current capabilities, as well as its products’ potential moving forward.

2) Alector ($ALEC) 

Another stock with major news to follow in the coming months, especially with the recent news of Aducanamab’s FDA approval, is clinical stage company Alector (NASDAQ: ALEC), which focuses specifically on finding cures for neurodegenerative diseases such as Alzheimer’s. In particular, the company focuses on immuno-neurological solutions, which center around dysfunction in a person’s immune system as the main cause of neurological disorders. Alector has multiple treatments currently undergoing clinical trials and is scheduled to present updates at a number of upcoming events, including the Alzheimer’s Association International Conference (AAIC) from July 26-30th. The main focus for Alector at this summer’s conference will be presenting data from its current open-label study on AL001 as the drug continues to move from phase 2 into phase 3. AL001 is a drug intended to treat frontotemporal dementia that is caused by specific mutations in the progranulin gene (GRN), which accounts for nearly 10% of FTD patients. At last year’s conference, Alector announced that preliminary phase 2 trials had resulted in sustained restoration of plasma progranulin levels in all FTD-GRN participants back to normal range, paving the way for potential phase 3 clearance if the results released this July continue to show a positive progression. Similar to the Biogen-Sage collaboration for the production and development of SAGE-217, Alector has been working on their product in tandem with pharmaceutical stalwart Abbvie, for which the former is eligible for milestone payments of up to $986 million if it is successful in exercising options. This factor makes the effects of the results announced this summer that much more magnified as another instance of a major company putting substantial assets into a startup product in its clinical stages. In addition to announcements about AL001 testing and continued patient enrollment in studies on the drugs, the company will also detail plans for upcoming phase 1 as well as results of phase 1b trials for AL002 and AL003, two drugs specifically intended to treat Alzheimer’s, respectively. Like AL001, AL003 has also been developed over the course of the past year in collaboration with Abbvie.

3) Cara Therapeutics ($CARA) 

The final stock investors should keep an eye on as the summer winds down is Stamford, Connecticut-based, clinical-stage business Cara Therapeutics (NASDAQ: CARA), which has a PDUFA date for the approval of Korsuva set for the 23rd of August. Korsuva, the company’s crown jewel, is an injectable medicine used to treat pruritus. This condition, otherwise known as chronic itchiness, can be caused by a number of milder factors such as sunburn, skin rash, and general irritation. Cara’s drug however, is aimed specifically at managing pruritus that accompanies advanced chronic kidney disease, or CKD. Research suggests that this side effect of the disease, known as CKD-aP, affects somewhere between 20-40% of CKD patients, becoming more prevalent as the patient’s disease reaches the end-stage. Pruritus related to CKD is characterized by daily bouts of itching, redness of the skin, and localized irritation of the back, abdomen, and arms. Most patients also report their symptoms to be worse at night than during the day. While the company’s most notable treatment, Korsuva Injection for Pruritus-CKD-HD, is only awaiting New Drug Application approval from the FDA, it also has a number of other iterations of the drug, including oral variations for pruritus caused by Atopic Dermatitis (AD), Notalgia Paresthetica (NP), and various chronic liver conditions. Each of these treatments have passed phase I and III of clinical testing, with the majority currently in the second stage. 

With clinical trials having been highly effective and generally well-tolerated by test patients, Cara is on the cusp of a major breakthrough not only in the novel treatment of a disease, but in the profitability of its company. Commercialization, which could come as a result of a late-August approval, would allow the company to collect revenue from the distribution and sale of its product for the first time. This is the ultimate checkpoint that biotechs, especially companies with one flagship medicinal development, must pass through if they want to survive and advance in the industry. However, investors should keep in mind that, if given the green light, Cara would split profits from the drug’s sale with Vifor Pharma as a result of an October 2020 agreement that netted Cara $100 million in funding upfront, and $50 million in equity investments. The deal gives the former a 40% stake in revenue from Korsuva’s commercial sales, and expands upon an initial research and development agreement signed by the two companies back in 2018. 

With so many unknowns in the nascent world of biotech, prospective investors have to be on the lookout for specific catalytic events such as press conferences, read outs, and product development announcements that will play a role in the fate of individual companies. Monitoring these three upcoming events can give interested parties an idea of what to look for so that they can begin to recognize these crucial developments on their own.