Things aren’t actually that bad.
After announcing a pause in clinical trial enrollment for its biggest pipeline program on April 8, BioCryst Pharmaceuticals ( BCRX -3.68% ) saw its shares take a nosedive that has left them down by more than 21% compared to a mere month ago. Though the rare disease biotech’s base of revenue isn’t directly affected by the pause, investors are likely concerned it might mean less income in the future.
In my view, the stampede away from BioCryst is a bit overblown. Follow along as I explore why I think that’s the case.
IMAGE SOURCE: GETTY IMAGES.
What’s going on with BioCryst?
First, let’s establish the context of what the company has done recently and where it’s trying to go in the future, so we can better judge the significance of the recent drop in stock price.
BioCryst currently has two products on the market. The first is Orladeyo, a recently launched pill for prevention of hereditary angioedema (HAE). The second is Rapivab, an injectable antiviral medicine for influenza. Sales of the pair brought in $157.1 million in 2021, though the company remains unprofitable.
In terms of its pipeline, there are four programs. Early-stage programs include a broad-spectrum antiviral as well as a drug for fibrodysplasia ossificans progressiva (FOP). The company’s most mature candidate is BCX9930, which is being investigated in a pair of late-stage clinical trials — the first for a blood disease known as paroxysmal nocturnal hemoglobinuria (PNH) and the second for certain kidney diseases like primary membranous nephropathy.
It’s a sudden pause in enrollment for BCX9930’s trials that hurt the company’s stock price earlier in April. Management said the pause in enrollment is due to higher-than-expected levels of creatinine in trial participants that require investigation before proceeding. Creatinine is a metabolic byproduct made by the body, and deviations from its normal range raises concerns about a patient’s kidney function.
However, people who are already enrolled in the trial are still going to be treated with BCX9930 during the halt, so that’s at least a somewhat encouraging sign.
There’s no catastrophe going on
It’s important to recognize that pauses in clinical trial enrollment happen all the time out of an abundance of caution.
Many trials subsequently restart enrolling new patients after the issue that prompted the pause is sufficiently understood. And because BioCryst is investigating BCX9930 for a handful of different conditions, it’s possible that the drug could still be used for certain patient demographics even if it turns out that others aren’t going to be treatable after all.
Beyond that, investors should also appreciate that BioCryst is nowhere near total defeat even if the entire BCX9930 program founders — unlike many other biotech stocks. Take a look at its finances over the last couple of years:
BCRX REVENUE (ANNUAL) DATA BY YCHARTS
In short, between its 2021 annual revenue and its cash holdings, it won’t have a hard time paying the bills this year even if expenses are higher than before. Nor do its negligible current liabilities pose any threat.
What’s more, management this year expects sales of Orladeyo to hit at least $250 million, which should help to offset the expected increase in expenses to as much as $480 million. Leaders think that its peak sales could be as high as $1 billion per year although it might take a few years to reach that level. Either way, reaching profitability isn’t imminent.
In the meantime, BioCryst’s operational efficiency will likely continue to improve. Consider this chart:
BCRX RESEARCH AND DEVELOPMENT EXPENSE (% OF ANNUAL REVENUES) DATA BY YCHARTS
Costs are falling as a proportion of revenue, whereas net losses are starting to ebb in relation to sales. Therefore, though it’s true that successfully commercializing BCX9930 could supercharge the stock, it isn’t strictly necessary for the company to survive.
So if you’re a somewhat daring investor, it’s reasonable to bet that BioCryst will be able to navigate its problems with BCX9930 and resume enrollment. Even if it can’t, it’ll still have a shot at delivering for shareholders as Orladeyo revenue ramps up.
On the other hand, I don’t think that I will be investing in this stock anytime soon. Though there’s definitely a chance of making a buck by betting against the pessimists who sold their shares earlier this month, there are other biotechs of the same size and maturity that haven’t — at least, yet — seen their most important pipeline programs hit a speedbump.
