ChemoCentryx: Platform, Pipeline, Spring-Loaded

| About: ChemoCentryx (CCXI)

Chemocentryx (CCXI) "ChemoCentryx is a biopharmaceutical company focused on discovering, developing and commercializing orally-administered therapeutics to treat autoimmune diseases, inflammatory disorders and cancer. The Company targets the chemokine system, a network of molecules, including chemokine ligands and their associated receptors, as well as related chemo-attractant receptors, all of which are known to drive inflammation."


Chemocentryx is a cutting edge biopharmaceutical company whose drug development platform and product pipeline both warrant serious investor consideration, but the clincher is market timing: the stock is poised for a strong bounce after a massive oversell, earlier this week. I intend to explain why the stock is oversold, why the company still has a very good position, and why there are still bullish possibilities which were ignored in the heat and panic of the selloff. I lastly explain why the stock is a very potent investment opportunity which could deliver for years to come.

The Fall

Chemocentryx was mentioned in media, earlier this week, in response to a non favorable phase III SHIELD-1 study result for its treatment for Crohn's disease, Vercirnon. The GlaxoSmithKline press release said the treatment, "did not achieve the primary endpoint of improvement in clinical response and the key secondary endpoint of clinical remission" and "The rates of serious adverse events and withdrawals due to adverse events were similar among the treatment groups, but there was a trend for dose-dependent increases in overall adverse event rates."... they went on to say "The results from the SHIELD-1 study are clearly disappointing but we are committed to further explore the data to determine the way forward to help patients with this chronic debilitating gastrointestinal disease," commented Paul-Peter Tak, MD, PhD, Senior Vice President, GSK Immuno-inflammation R&D.

In response to this news, the stock was down 45% midday, and closed at -31%. Although preliminary test results disappointed researchers and investors alike, I believe this company really deserves a second look, and I have many reasons to say that.

A Brief Summary of the Retorts

First, the company's fortunes were not all riding on that single drug. Even were it proven conclusively that Vercirnon is not a good candidate for FDA approval, there are still nine other drugs under development in the company's pipeline.

Next, the company has developed a proprietary platform, the EnabaLink® Drug Discovery Engine , for rapid generation and identification of drug molecule candidates. This can be expected to generate a steady, fast-paced stream of new drugs for further R&D.

Thirdly, there is still a chance that Vercirnon could redeem itself in post-study investigations. The researchers are still working on identifying the reason the study results did not meet the endpoint. It is credible to maintain hope.

Fourth, the stock itself is poised to spring back, even if you disagree with all of that. The selloff was an oversell, and a rebound has been staging up, beneath the surface, all week. Now it's lined up for a major bounce, and a quick study of the graph will convince you of that. The first clear sign it was really beginning was a strong positive close (+3.91%), on Thursday.


Drug Pipeline -- 10 Drugs Under Development

The first reason Chemocentryx is still a good investment is that it has nine other drugs in the pipeline, even without Vercirnon. These drugs range from Diabetes, Vasculitis, Rheumatoid Arthritis, Renal Indications, Inflamatory Bowel Disease, Glioblastoma, Atopic Dermatitis, Chronic Hepatitis to Autoimmune Disease... as you can see, the company's value is not just wrapped up in Vercirnon... nor primarily. Chemocentryx has significant potential in each of these drugs.

From the company's website:

Therefore, even if Vercirnon does not pan out, Chemocentryx still constitutes a very reasonable investment. This company has plenty going on. It should not be construed that Vercirnon is half the value of the company. With 9 other candidates moving up the pipeline, Vercirnon is only a fraction of this company's value.

EnabaLink Drug Discovery Engine

Chemocentryx has developed a cutting edge platform, the EnabaLink® Drug Discovery Engine, which enables rapid identification of molecules which are effective in targetting particular receptors within the body. This allows for rapidly prototyping of new drug candidates. In that manner, EnabaLink streamlines the drug discovery process substantially, and enables them to bring forth drug candidates faster than could otherwise be achieved, and much more efficiently both in terms of time and preliminary research / investigation. One can rightly expect this platform to bring new product candidates to the table on a fast schedule. Taking a look back at their pipeline confirms this belief.

The company describes the engine in this way (from the above link):

"We believe that this platform provides us with a one-of-a-kind advantage in the rapid identification of highly specific drug candidates. It includes the following platform elements developed by the company:

Comprehensive Map of the Chemokine Network

We have developed a thorough functional genomic map of the chemokine system which assists us in our understanding of the role of a given chemokine receptor in the system as well as its likely effect on the migration of inflammatory cells in a given inflammatory disease state.

Reverse Activation of Migration (RAM) Assays and Screening Technology

With this understanding of the chemokine network, we can apply our advanced screening methodologies, including a purpose-built high-throughput robotic screening technology, known as the Reverse Activation of Migration, or RAM, Assay, to identify small molecule antagonists for the chemokine receptor most closely associated with a specific disease."

It is therefore clear that even if Vercirnon were proven ineffective, this drug development platform clearly has alot of potential. But the next point is that it -might- still -be- effective.

Still Hope for Vercirnon

Third, and certainly not least, there is still a hope of redeeming Vercirnon, which recently failed to meet the endpoint of SHIELD-1 phase 3 trials. I'm not just thinking wishfully to say this. Studies have to be conducted in a very specific way in order to be instructive, and if you read the press release about the Vercirnon study, they clearly stated that there was some dose-related change in the frequency of Crohn's symptoms. They further went on to say that they are investigating the results to figure out what happened. I have to say, and I don't what this taken as a blanket endorsement for Vercirnon, that it sounds as if the study itself were conducted at the wrong dosage. It was conducted by a third party, and I would not be surprised, considering they did document a dose-related reduction "event rates". Therefore, it could very well be that the study itself was conducted at the wrong dosage level. We could see Vercirnon studied again at an increased dose level sometime soon, and with more scrutiny on how the study itself is conducted. I cannot emphasize this enough: science has to be done the right way, or it doesn't yield an accurate result. I don't want to be taken as going on record saying Vercirnon will work... but from what I have read in this press release, it might still be redeemed. There is at least a glimmer of hope for that.

The Stock is Already Coming Back, Regardless:

The final point, here, is that after three days of being very down, Vercirnon's stock closed with a strong upward trend on August 28, 2013. This is the first sign of real bounce since the fall, and I believe that's just the beginning. CCXI was sold so hard that there's plenty of upside potential in this rally, and, if it turns out that Vercirnon's potential is somehow redeemed in the investigation, those who hold beyond this week could see even greater gains. Whether the other logic convinces you or not, it does appear that a major CCXI rally is just beginning. CCXI started a climb at 2pm on Thursday, and ran steadily, strongly up at close. I expect it will be very exciting to see just how far this one goes.

Conclusion -- Chemocentryx is a Great Investment Opportunity.

I have cited 4 major reasons that the time to invest in CCXI is right now. First, their product pipeline is huge. Second, they have a very compelling drug development engine. Third, Vercirnon might be redeemed... and, fourth, the stock is poised to climb whether you believe any of that or not. The combination of these observations leads me to the conclusion that it would be a very smart time to invest in CCXI. Investment now could lead to something very good not only in the short term, but also in the long. Those who wish for immediate gain can find it, and those who hold on longer have a respectable chance of gaining more, playing it long. Good luck to you all, and happy investing.

Disclosure: I am long CCXI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.