For biotechs, the recipe for success is simple. Offer up good news regarding clinical data or a regulatory decision, and you get rewards in the shape of major gains. By the same token, throw in a disappointing outcome, and sentiment can quickly sour.
Case in point, take CytoDyn (CYDY). On September 16, the company provided an update on the clinical development of leronlimab, its CCR5 antagonist, in COVID-19 and HIV. Management stated that the FDA had requested additional data, namely the interim results from the Phase 2b/3 trial (CD12) in severe or critical COVID-19 patients, which is currently enrolling subjects, before granting the candidate emergency approval. In response, shares fell 15% in the following session and haven’t recovered since.
In an earlier Phase 2 trial (CD10) evaluating the therapy in COVID-19 patients, the company reported positive top-line results. It should also be noted that CYDY is set to initiate a Phase 3 trial of leronlimab in mild-to-moderate COVID-19 patients.
Writing for H.C. Wainwright, analyst Yi Chen commented, “We believe that the FDA’s decision is based on the fact that severe and critical COVID-19 patients constitute those who need effective and safe medicines the most at this time; accordingly, the agency would like to have a good idea of leronlimab’s performance in this patient group before making any approval decision.”
Bearing this in mind, Chen argues CYDY “is unlikely to receive emergency approval of leronlimab for COVID-19 in the immediate term.” To this end, he views the data readout from the CD12 trial, which could come in Q4 2020, as the next potential catalyst.
On top of this, in July, CytoDyn received a Refuse to File (RTF) letter from the FDA regarding its Biologics License Application (BLA) for leronlimab as a combination therapy with highly active anti-retroviral therapy (HAART) for highly treatment-experienced HIV patients. While the company now has all of the required data and is compiling the data package, management has not disclosed a time frame for the BLA resubmission.
Based on all of the above, Chen maintained his Neutral (i.e. Hold) rating on CYDY shares. Given the market valuation and volatility, the analyst doesn’t attach a specific price target. (To watch Chen’s 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.
