AnaptysBio Inc (NASDAQ:ANAB) is up 460% from its 52-week low.
When a stock is up five-fold from a yearly low, that is not the time for value investors to examine the stock more closely to pick an entry point. More often than not, the positive momentum and buying pressure will keep a stock elevated for a long while — unless there is a negative catalyst that sends the stock down.
ANAB’s positive momentum started in Oct 2017 when the company reported positive clinical results for a dermatitis study. But are there any negative catalysts ahead that could hurt ANAB stock?
Positive ANB020 Study for Treating Atopic Dermatitis
In October, AnaptysBio reported positive Phase 2 clinical study results for a drug treating atopic dermatitis (also called eczema). The results showed a single intravenous dose of the drug, dubbed ANB020, resulted in a 50% improvement from AD’s symptoms in 75% of patients after 15 days, 83% after 29 days, and 75% in 57 days.
This is promising. Investors should still exercise caution at this time, however. Phase 2a studies represent a very early phase of drug development. AnaptysBio has a long way to go before it has a product on the market. Further, the study’s size totaled just 12 subjects.
Pfizer Inc. (NYSE:PFE) recently launched an ointment treating atopic dermatitis. The much larger company has the marketing budget to promote EUCRISA (crisaborole) in a way AnaptysBio cannot. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) also recently launched Dupixent in the U.S. and is rolling out the drug worldwide in phases.
Clearly, these giant pharmaceutical firms are potential headwinds for AnaptysBio when the company eventually launches its drug to market.
ANAB stock is significantly smaller than its competitors at a $2.52 billion market cap. By comparison, Regeneron has a market cap of $36.2 billion while Pfizer is even bigger with a market cap of $215 billion.
Positive ANB020 Results for Peanut Allergy
Earlier this week, on Mar 26, AnaptysBio reported positive results for its Phase 2a proof-of-concept trial for treating adults with peanut allergy. Of the 20 patients treated, 46 percent reported improved peanut tolerance. The company highlighted the safety profile of the drug. On the press release, the company’s CEO Hamza Suria said:
“We are encouraged by the rapid improvement in peanut tolerance and favorable safety profile observed to date in this study following a single dose of ANB020.”
While ANB020 may appear like overkill for treating peanut allergies — the base of the medication is an expensive monoclonal antibody — that is not quite the case.
Allergy sufferers do have significantly cheaper alternatives than ANAB can offer. If the FDA approves this drug, the company may have a hard time competing with established treatments that include prednisone and Benadryl (both available in generic form), and EpiPens made by Mylan N.V. (NASDAQ::MYL).
None of these options lessen the severity of an allergic reaction ahead of time, however. All of these are medications are taken after ingesting a peanut. People with very severe peanut allergies can die even if they use these medications quickly and correctly. ANB020 may decrease a person’s sensitivity to peanuts ahead of time, making these other treatments more effective.
Mixed Shelf Offering
Last February, the company filed a mixed shelf offering. The company is authorized to issue 510 million shares. Even a small stock sale will dilute existing shareholders. As of Sept. 30, 2017, it had 20,496,288 outstanding shares of common stock. The market’s failure to react to this news is scary.
When Synergy Pharmaceuticals Inc (NASDAQ:SGYP) raised money through the stock market, investors reacted harshly. And Synergy is further ahead of AnaptysBio when it comes to a product on the market. (Its drug, Trulance is a once-daily tablet approved for adults with CIC and IBS-C.)
The point here is that Synergy is a less risky stock and yet it is down over 60 percent from its highs and has a market cap of just $453 million. Meanwhile, ANAB has yet to see any sort of correction.
The Bottom Line for ANAB Stock
AnaptysBio shows “multiple tops” at over $120 a share in its charts, a bearish signal.
Apart from its charts suggest, there are many challenges that lie ahead for ANAB.
Investors should consider Pfizer, Regeneron, or AbbVie Inc. (NYSE:ABBV) if interested in companies developing similar drugs. AbbVie’s Upadacitinib was granted a breakthrough therapy designation from the FDA in January. And since that announcement, the stock fell 27 percent.
Disclosure: Chris Lau does not own shares in any of the companies mentioned but may buy AbbVie or Pfizer stock within the next 72 hours.