Is This Small-Cap Biotech a Buy Before 2020?

ChemoCentryx (NASDAQ:CCXI) develops drugs for orphan diseases, meaning those with fewer than 200,000 patients in the U.S. Currently, ChemoCentryx has four drug candidates in development with the most advanced being avacopan. This quarter, ChemoCentryx will announce pivotal trial results with avacopan in a make-or-break binary event for investors…

Avacopan’s pivotal phase 3 clinical trial seeks to help patients with anti-neutrophil cytoplasmic autoantibody (ANCA) vasculitis. Simply put, the patient’s immune system activates a specific type of white blood cells, called neutrophils, that then attack the small blood vessels, causing inflammation and swelling. The irreversible damage can lead to kidney failure. According to ChemoCentryx, ANCA vasculitis afflicts between 40,000 to 75,000 patients in the U.S. and 50,000 to 100,000 patients in Europe.

ANCA vasculitis patients need improved treatment options

Today, ANCA vasculitis patients typically receive high-dose steroids with an immunosuppressant, either cyclophosphamide or Rituxan from Roche Holding. This approach has been around for nearly 50 years.

But steroids, especially when given chronically, can be toxic, and suppressing the immune system can lead to infections. A study published in the Annals of Rheumatic Diseases by Little et al. evaluated data on 524 ANCA vasculitis patients in Europe found 11% of them died within one year, and 59% of those deaths were a result of therapy.

ANCA vasculitis patients clearly need better and safer treatment options. Enter ChemoCentryx and avacopan. The company heralds avacopan as the “most precise mechanism of action” aimed at modulating the complement system.

According to ChemoCentryx, the complement system, one of the components of the immune system, consists of a group of proteins responsible for regulating the defense against bacteria and viruses, triggering inflammation, and removing debris from cells and tissues. Dysregulation of the complement system can cause the body to launch an attack on healthy cells resulting in autoimmune diseases like ANCA vasculitis.

Avacopan works by specifically inhibiting the C5a receptor. This then prevents the activation of neutrophils, the white blood cells that carry out the attack on the blood vessels in ANCA vasculitis. ChemoCentryx believes the specificity for that receptor benefits patients while leaving the rest of the immune system intact.

Targeting the complement system to fight autoimmune diseases recently emerged as a hotbed for biotechs, including Apellis Pharmaceuticals (NASDAQ:APLS)Omeros (NASDAQ:OMER), and Ra Pharmaceuticals (NASDAQ:RARX). Earlier this month, Ra announced it was being acquired by Belgian pharma UCB for $2.5 billion, representing a 90% premium to the company’s stock price.

Avacopan’s pivotal phase 3 trial

The phase 3 trial, scheduled to have results this quarter, aims to achieve two primary endpoints: to determine if the patient achieves remission after 26 weeks of treatment and then if the patient has maintained the remission after 52 weeks. Historically, patients receiving standard-of-care treatment frequently relapse over time. But some analysts caution that 52 weeks may not be long enough to capture the timing of relapses in a real-world setting.

The phase 3 trial is not the typical trial designed to show superiority of one drug over another. Instead, the aim is “non-inferiority” to the standard of care. The company claims that a superiority-based trial requires too many patients to be practical for this rare disease. Instead, it seeks to show comparable efficacy while hopefully demonstrating other benefits such as fewer or less severe side effects and ease of administration with a pill compared to an injection…

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