BioCryst Erases Gains On A Failed HCV Preclinical Program

Last week was very disappointing for shareholders of BioCryst Pharmaceuticals (BCRX), which saw a gut-wrenching drop of 37% on October 31st in reaction to a press release stating that the company was withdrawing its IND (Investigational New Drug) application for BCX5191.
The application would have allowed BCX5191 to discontinue preclinical studies on animal models and advance onto clinical trials on human subjects. Approval of an IND application is an essential first step for any drug or treatment intended for humans.

Considering that BCX5191 wasn’t able to pass its first hurdle (which isn’t supposed to be difficult in the first place), it’s only natural that the market got extremely bearish despite the fact that the company is still “exploring opportunities” for BCX5191. For most of us, the only question now is whether or not the selling on BCRX stock was overdone. Since BCX5191 was basically left for dead by Wall Street, our attention turns to the rest of the company’s pipeline.

BioCryst has five programs in its pipeline, and Peramivir is generally considered the most important due to its proximity to an NDA submission (which should happen in 2013). Peramivir generates a lot of excitement for BioCryst due to its prospects as an influenza drug. Influenza, which is commonly referred to as “the flu”, affects a very large portion of the population (anywhere between 5-20% of the population according to CDC estimates.)

According to company statements, there is a complete lack of any approved, injectable antiviral for patients with severe or complicated cases of influenza outside of Japan and Korea. Peramivir rapidly inhibits the function of a protein known as neuraminidase, which is an essential protein for HCV replication and spreading in patients’ cells.

Other drugs like Zanamivir (marketed as Relenza by GlaxoSmithKline) and Oseltamivir (Tamiflu) are neuraminidase inhibitors as well, but their methods of delivery (inhalation and oral, respectively) do differ. They do also differ in efficacy, although it’s hard to discuss this without double-blind studies. What we do consider is that Peramivir works significantly faster than an oral anti-viral compound like Oseltamivir, and could be utilized more freely than Zanamivir due to its ability to be continuously administered through an IV drip.

Although it has already received approval in Japan and Korea, the stock market is much more concerned about Peramivir’s progress towards FDA approval in the United States. The company continues to recruit patients into a pivotal phase III study which will study the efficacy of Peramivir in addition to standard of care treatments in both children and adults who are hospitalized due to serious cases of influenza. We are expecting the primary results of this study in April of 2013, which should allow BioCryst to submit an NDA for Peramivir in the treatment of influenza.

Investors who aren’t as keen on BioCryst’s flagship drug should still consider the potential of other programs, like the gout treatment BCX4208/Ulodesine as well. Like Peramivir, Ulodesine targets an enormous therapeutic market. Gout affects a rough estimate of 6 million adults in the United States at a time, which provides plenty of room for any innovative gout treatments to succeed. While gout is usually a minor condition that disappears on its own in a matter of days, some serious cases can require prescribed treatments.

In recent clinical trials, Ulodesine proved to be a safe and highly effect treatment for gout when used in conjunction with standard of care compound, Allopurinol. The results of Ulodesine’s phase IIb trials were released in January of this year, and induced enough buying interest to double the value of the stock in just two months. Due to the buying, BCRX reached a new high of $5.95/share in March yet failed to hold on to the momentum.

With the recent drop in BCRX that followed the unofficial death of BCX5191, BioCryst has given back the last of the gains seen in the Ulodesine rally. BCRX has moved only 3.6% higher YTD, and saw virtually no net gain, or loss, in short interest.

If you think that the de facto death of BCX5191 wasn’t a big deal, and if you still have confidence in the market potential of Peramivir, Ulodesine, or BioCrysts’s other programs BCX4161 and Forodesine, you can consider the recent drop as a value buyer’s opportunity. BioCryst’s recent tumble shaved about $70 million off of the company’s valuation. If it was fairly valued prior to October 31st 2012, that would imply that BCX5191 was indeed worth $70 million or more. This seems a bit steep for a preclinical drug (even if it was targeting the ever-popular HCV drug market), and implies that the market might have been too harsh on BioCryst for its one blunder.