- Chemocentryx released 12-week phase 2 data on its diabetic kidney disease drug CCX140 last year, and they were underwhelming. 52-week data are due next quarter.
- Nevertheless, the results were positive for a subgroup that Chemocentryx is being a bit coy about.
- It is probable, judging by words of management, that this subgroup consists of diabetics with a high level of albuminuria, a main symptom of kidney disease.
- Given the depressed expectations, any positive results with this subgroup could push the stock higher, creating a tradable opportunity in the coming quarter.
The estimates regarding the total cost of diabetes in the US vary wildly, depending on what you count and who is being asked. Forbes put the number at $34B in 2007. The American Diabetes Association put it at $145B that year, and a whopping $245B in 2012, counting lost productivity. Whichever number you want to believe and whatever you want to count, it's among the most expensive diseases in the US.
The nature of the disease and what it leads to makes treatment lifelong and more complicated as time goes on. If a sufferer is even slightly lax with diet and exercise, blood sugar problems will lead to atherosclerosis of nearly every blood vessel in the body from tiny capillaries to large arteries. These lead to complications like macular edema, loss of circulation, heart and kidney disease, all essentially the same problem of a degrading circulatory system affecting different organs.
For biotechs, this makes diabetes indications especially lucrative. Complications are just never ending, and very prevalent.
Chemocentryx (NASDAQ:CCXI) is within 3 to 5 months of announcing 52 week results for its phase 2 trial of its diabetic nephropathy candidate CCX140, a chemokine blocker. All diabetics are at risk for nephropathy, which is the leading cause of end stage renal disease in the US. What happens is that the capillaries in the kidney harden and begin leaking, making the organ increasingly incapable of filtering blood.
Where CCX140 and chemokines come in is that part of the disease is exacerbated by an immune response led by chemokines. The immune system senses kidney damage and these inflammatory molecules are then sent to the kidney. The body doesn't understand that the damage is not caused by an infection, so the inflammation only makes things worse. CCX140 blocks a certain chemokine that is specific to the kidneys, in theory shutting off the inflammatory response there and improving kidney function without affecting the rest of the body.
Chemocentryx has been through the proverbial ringer since it released 12-week data on this trial almost exactly one year ago.
Data were mixed as CCX140 showed a reduction in albuminuria (excretion of protein in the urine) of 21% versus 12% for patients on background medications, but the results were not statistically significant due to the short treatment period. However, with the 52-week data, the same data may show statistical significance as the sample will be more spread out over time.
Additionally, according to the company a certain subgroup of patients showed a much higher 30% reduction in albuminuria. Though Chemocentryx has not been explicit as to what that subgroup is, it is likely the subgroup with high albuminuria. In other words, the worse the nephropathy, the more helpful CCX140 seems to be. Here I am referring to the words of VP of medical operations Pirow Bekker:
…[W]e want to look at the subgroups of patients. We are very, very keen to evaluate again the efficacy in patients that have high albuminiria and relatively normal-to-high eGFR. So I think it's going to be important to evaluate the efficacy signal in that group.
These two factors in mind, and given the fact that the stock is severely depressed since mid 2013 on the mixed 12-week results in addition to a phase 3 failure for Crohn's Disease two weeks before that on August 23, any positive results are likely to push the stock higher, at least for a time. Chemocentryx's market cap went from $620M in 2013 to $220M now skirting the lows, which gives an idea of how depressed the stock is.
Financially, the company is in average shape. At a current quarterly burn rate of $10.7M and liquid assets of about $100M, Chemcentryx has about two years before it needs to refinance. The catch is that phase 3 will include 1,500 patients (page 14) and is easily the most expensive phase of clinical testing. Cash burn rate will go up substantially if and when phase 3 begins.
For now, watch the high albuminuria subgroup when results come out by the end of the year. Many are expecting failure because of past results, which elevates the potential upside.