Concord Biosciences Holdings, Inc. (NASDAQ:HRMY) is staying depressed due to the failure of a Section 3 examine for pitolisant in sufferers with Idiopathic Hypersomnia, challenges from quick sellers, growing doubts about its patent property, doubt concerning the worth of its Zynerba acquisition, and growing competitors from just a few rivals, together with Axsome Therapeutics (AXSM). The inventory is down just a few share factors from once I final coated it in Might, however that is as a result of it was already down by then. In October this yr, after its section 3 examine failed to satisfy its major endpoint, the inventory shed 40% of its worth. That it did not lose extra might be as a result of pitolisant, branded Wakix, is a reasonably robust income generator. As I wrote final yr:

Extreme daytime sleepiness will be brought on by narcolepsy, obstructive sleep apnea, and a bunch of different components. Wakix is accredited to deal with EDS or cataplexy (temporary assaults of weak spot on emotional arousal) in grownup narcolepsy sufferers. It’s at the moment the one FDA-approved non-scheduled narcolepsy drug with a handy, once-daily dosing. The narcolepsy market is giant, at $2bn, and Wakix with its handy dosing and novel mechanism of motion is well-positioned to seize a superb chunk of that market.

Wakix is a profitable drug. In its 4+ years of market existence, the asset has remodeled $1bn for Concord. Though its monopoly has come below problem from junior friends, Concord’s plan was to get it accredited for newer indications and develop its topline. That plan has come below appreciable cloud with the trial failure in Idiopathic Hypersomnia.

On October 13, the corporate introduced this knowledge within the header of its launch thusly:

Though major final result for extreme daytime sleepiness (EDS) between pitolisant and placebo didn’t attain statistical significance within the randomized withdrawal section, additional knowledge evaluation is ongoing to tell subsequent steps

Optimistic tendencies favoring pitolisant have been noticed in different prespecified endpoints together with Idiopathic Hypersomnia Severity Scale (IHSS) and Sleep Inertia Questionnaire (SIQ)

Security and tolerability profile in grownup sufferers with idiopathic hypersomnia was in step with established security profile of pitolisant

The totality of proof from INTUNE examine and the Orphan Drug Designation for pitolisant gives optimism for subsequent steps with FDA

Thus, there was no clear win, making the scenario dangerous for pitolisant on this indication. The corporate now has to run with “the totality of proof,” as an alternative of the rather more sturdy “major endpoint win.”

Wakix has an a variety of benefits over its friends, a very powerful of which is its non-scheduled nature. Meaning, it’s not vulnerable to abuse like its rivals. Xyrem and FT-218, for instance, are variations of sodium oxybate, and are schedule 3 managed substances, whereas AXS-12 is a schedule 4 managed substance. Thus, to a various extent, these medication are vulnerable to abuse whereas wakix isn’t. This has broad implications for insurance coverage in addition to prescriptions.

The issue for Concord is that Wakix is its one-trick pony. There are two methods to succeed: one is label enlargement, the place they at the moment have two labels and wish this one for additional development. The opposite is buying new property. This they endeavored to do by buying Zynerba.

Nonetheless, there are some doubts about this one as effectively. Concord acquired Zynerba for $200mn earlier this yr, nonetheless, its key asset, Zygel, has its doubters, together with analysts at Goldman Sachs who just lately mentioned that Zygel’s knowledge is not sturdy. Zygel is at the moment working a Section 3 trial for sufferers with Fragile X syndrome, a uncommon behavioral dysfunction with no FDA-approved therapies. In 2020, it missed a pivotal trial in the identical indication, attaining neither the first nor any of the secondary endpoints. Whereas Zynerba recovered sufficient to supply strong knowledge in April this yr, these doubts stay.

A 3rd downside is the quick assault from Scorpion Capital. I mentioned this in my earlier article, so, for background, I’ll merely reproduce the title of the quick report, and allow you to determine for your self whether or not you possibly can belief a report with a title like this:

The Newest Worth-Gouging Ploy By The Grifter Who Impressed Convicted Felon Martin Shkreli, However This Time Individuals Have Blood On Their Arms: A $175,000 Per Yr Drug With Alarming Toxicity And A Path Of Lined-Up Deaths And Accidents; No Efficacy; A Non-Existent Mechanism Of Motion; Sham Patents; Primarily based On Rip-off Medical Trials In Locations Like Russia And Turkey By A French Quack; Pushed Through False Promoting And A Huge Off-Label And Doctor Kickback Scheme

Sure, that’s the title in its entirety. In August, Concord gained a small victory over Scorpion Capital after an enchantment towards the validity of its key patent was rejected by the USPTO. One other citizen’s petition filed by Scorpion was termed “nonsubstantive” by the FDA.

The ultimate downside right here is patent expiry. Their key patent expires in 2028, and whereas there are different methods to achieve market exclusivity, none are as sturdy as a composition of matter patent.

Financials

HRMY has a market cap of $2bn and a money steadiness of $438mn. Internet product revenues for the quarter ended September 30, 2023, have been $160.3mn. Analysis and Improvement bills have been $17.5 million within the third quarter of 2023, gross sales and Advertising and marketing bills have been $23.4 million, and basic and Administrative bills have been $22.5 million. Whole working bills have been $63mn. That offers them a money runway of a number of quarters.

Backside Line

HRMY has had its ups and downs during the last 18 months, and there was a time once I thought I ought to have purchased the inventory. Proper now, although, I’m not so positive. The inventory isn’t buying and selling at its yearly lows, and the trial failure has weighed on its worth proposition. Till Concord Biosciences Holdings, Inc. meets with the FDA and comes out with a powerful plan for this program, I do not imagine it’s adequately de-risked.