AveXis Inc. (NASDAQ: AVXS) shareholders have enjoyed a 103% gain over the past year and a stunning 333% gain since the clinical-stage biotech made its debut as a publicly traded company in early 2016. Despite the terrific run-up, there are at least four reasons the rally could continue.
The company is developing a gene therapy for the treatment of an inherited, muscle-wasting disease. If eventually approved, AveXis Inc.'s drug would compete directly with another recently approved therapy developed by Ionis Pharmaceuticals Inc. (NASDAQ: IONS) and marketed by the industry giant Biogen Inc. (NASDAQ: BIIB). Let's begin with results so far in order to see why these two should be worried, and AveXis investors are so excited.
1. AVXS-101 is batting a thousand
Infantile-onset spinal muscular atrophy (SMA) is so debilitating that children born with the condition have a 1-in-4 chance of living through their first 13.6 months without requiring a ventilator to breathe at least 16 hours per day for a two-week stretch. This past April, AveXis stock soared when the company announced compelling results that suggested its lead candidate can raise a child's chances of reaching 13.6 months of age without such an "event" to 100%.
In an early-stage trial, all 15 infantile-onset SMA patients treated with AVXS-101 reached 13.6 months of age event free. Although you should always be leery of clinical-trial results that measure success against historical data instead of a randomized control group, it looks like the company has a real winner on its hands. At the last follow-up, a majority of patients given low and high doses of AVXS-101 had reached 20.2 months and 30.8 months of age, respectively, without requiring constant ventilation support.
2. Blockbuster potential
To get a handle on AVXS-101's potential, we only need to look at the first (and only) drug approved for the treatment of SMA. Spinraza, from partners Ionis and Biogen, earned approval at the end of 2016 and already racked up $47 million in sales during the first quarter this year.
Potential competition from AVXS-101 aside, annual Spinraza sales are expected to hit around $2.5 billion at its peak. Despite AveXis Inc.'s big run-up this year, the company's recent market cap is just $2.1 billion. Biotech stocks tend to trade at multiples several times higher than total sales, which points to some big gains over the long run if AVXS-101 eventually earns approval and displaces Spinraza in the SMA space.
3. Possible efficacy advantage
It's still too early to call a winner, but the small amount of data pointing to 100% event-free survival at 13.6 months suggests AVXS-101 is a far more effective therapy for the treatment of infantile-onset SMA than Spinraza. During a 121-patient study supporting Spinraza's approval, 61% of patients treated with the drug survived through 56 weeks without needing permanent ventilation support versus just 32% in the control arm. While Spinraza provides a clear event-free survival benefit over a placebo, it's a long way from the 100% event-free survival rate at 13.6 months, which was seen in the 15-patient study with AVXS-101.
Before we throw in the towel for Spinraza, it's important to note that it hasn't been tested against AVXS-101 in a head-to-head study. At this point, it's too early to draw concrete conclusions about which drug is, indeed, most effective.
During the present quarter, AveXis intends to begin studies to support applications for the treatment of infantile-onset SMA and a more common, but less severe, form of the disease. The analysts that recommend Biogen and Ionis for our premium services will most likely wait for the results before making any decisions regarding AveXis or its potential competitors.
4. Beyond SMA
The company's lead candidate essentially infects SMA patient nerve cells with a functional copy of the SMN gene. This leads patient nerve cells to produce the SMN protein they previously lacked, and it stands to reason the same delivery mechanism could work with other genetic disorders.
AveXis doesn't own the virus shell that delivers the functional SMA gene to nerve cells, but the company recently licensed the same capsid to develop candidates similar to AVXS-101 aimed at Rett syndrome and inherited amyotrophic lateral sclerosis (ALS). Both diseases are rare, but lethal, and there aren't any available treatments that address the genetic cause of either disease.
It's extremely early for the company's Rett syndrome and inherited ALS candidates. The biotech hasn't tested either in humans yet, but we should know if there's a chance of beginning clinical trials for both during the second half of the year. If either candidate generates results as thrilling as what we've seen in SMA, the AveXis stock rally could go much further.
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