Update: Opexa Q2 Earnings - Stock Down, But Buyout Thesis Remains Intact

| About: Opexa Therapeutics, (OPXA)


Opexa reported Q2 earnings on August 14, 2014.

Despite the earnings miss, which raises my concern over increasing losses, I remain bullish on Opexa.

As anticipated, the progression of Tcelna for Secondary Progressive Multiple Sclerosis remains on course.

In April, I wrote a PRO article on Opexa Therapeutics (NASDAQ:OPXA) with a thesis stating that ongoing clinical success of Opexa's lead drug candidate, Tcelna (imilecleucel-T), could translate to regulatory approval and potentially fill a significantly unmet medical need in patients with Secondary Progressive Multiple Sclerosis (SPMS). I also argued that Merck Serono, the biopharmaceutical division of Merck (NYSE:MRK), which has option and licensing rights to Tcelna, could acquire Opexa at a substantial discount before exercising its option in order to avoid hefty milestone and royalty payments if and when the product is commercialized. After the Q2 earnings miss, which is completely unrelated to the progress of the Tcelna program, I see no reason to amend my buyout thesis on Opexa.

Some key highlights of Opexa's Q2 earnings report are as follows:

  • Operating expenses increased to $4.5M, up 46.1% as compared to Q2 2013.
  • Net loss increased to $4.2M, up 39.9% as compared to Q2 2013.
  • Loss Per Share increased 59.5% to $0.15, missing analyst estimates by $0.02.
  • R&D expenses increased to approximately $3.4 million, up approximately $1.2 million as compared to Q2 2013.

During the conference call, CEO Neil Warma reiterated that the Abili-T Phase 2b clinical trial completed enrollment, and researchers are continuing to collect data from the immune biomarkers, taken periodically during this 2-year trial. This information is expected to enhance the knowledge of the underlying mechanism of action of Tcelna and possibly facilitate the discovery of novel biomarkers. Mr. Warma stated that a topline readout from the Phase 2b study is expected in the first half of 2016, which serves as the next major catalyst that should give shareholders a better understanding of the market potential of Tcelna. During Q2, the company refined the T-cell manufacturing process and the overall platform to support the ongoing Phase 2b trial and future Phase 3 trials. Mr. Warma stated that the company is also conducting the necessary research to target a new T-cell mediated autoimmune disease indication, which should help diversify Opexa's risk profile in the event that a new indication is established. Thus, as the company remains on course to provide a topline readout for the Abili-T study in the first half of 2016, I see no reason to amend my buyout thesis on Opexa.

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