ChemoCentryx Stock: Revisiting the Investment Case (NASDAQ:CCXI)

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We are what we say we are, so we have to be careful what we say we are.. ”― Kurt Vonnegut

Today we delve deeper into a name that comes up from time to time in the comments of Seeking Alpha subscribers. We last published a article on this small-cap name in December after recently gaining key FDA approval. We track the company’s progress in the analysis below.

Stock chart

Looking for Alpha

Company presentation:

ChemoCentryx, Inc. (NASDAQ: CCXI) focuses on the development and commercialization of new drugs for inflammatory disorders, autoimmune diseases and cancer. The company is based just outside of San Francisco. The shares are currently trading around $25.50 per share and sport an approximate market capitalization of $1.8 billion.

COMPANY VISION

May Company presentation

When we last reviewed this company, it was only two months before the FDA approved its lead drug candidate TAVNEOS as an add-on treatment for adult patients with severe active autoantibody-associated vasculitis. cytoplasmic neutrophils (ANCA vasculitis), in combination with standard therapy .

This was a big win for the company, even though the drug is targeted at a small subset of the vasculitis population. The drug was launched in the United States where it owns all rights. TAVNEOS has also been launched in Germany and Austria by partner Vifor Pharma, which owns the rights outside the United States. ChemoCentryx collects royalties between mid-teens and mid-twenties on all sales outside of this country. TAVNEOS has also been approved in the UK and Canada.

Pipeline

May Company presentation

TAVNEOS is also being developed for other conditions. The company has other compounds in an earlier stage of development, but they will not be relevant to this analysis.

This compound targets lupus nephritis or LN. LN is kidney inflammation caused by systemic lupus erythematosus (SLE or lupus).

TAVNEOS For LN

May Company presentation

ChemoCentryx expects to receive comments from the FDA shortly regarding the clinical development plan for this indication, which it expects to initiate in the second half of 2022.

TAVNEOS is also being developed to treat severe hidradenitis suppurativa (HS). It is a chronic skin condition, which causes painful boil-like bumps that form under the skin and often secrete pus and blood.

TAVNEOS for HS

May Company presentation

The company plans to meet with the FDA to discuss the Phase III development of TAVNEOS in patients with Hurley Stage III (severe) HS late in the second quarter. Management aims to launch a phase III clinical trial in these patients in the second half of this year.

Finally, TAVNEOS targets C3 or C3G glomerulopathy. There are no FDA-approved therapies for C3G, which is a group of related conditions that cause kidney dysfunction. Management plans to meet with the FDA in the second half of this year to discuss TAVNEOS’ “ACCOLADE” Phase II clinical trial data set for treating 3G-C.

First quarter results:

On May 5, the company released the first quarter Numbers. ChemoCentryx posted a GAAP loss of 55 cents per share on revenue of just under $5.5 million. Both the top and bottom numbers largely missed expectations. U.S. net product sales increased more than 500% from the fourth quarter to $5.4 million. Collaboration and licensing revenue made up the rest of the sales.

A $45 million regulatory milestone payment that ChemoCentryx obtained for the approval of TAVNEOS in Europe during the first quarter of 2022 will be recognized over a period of approximately four years. The timing of recognition was most likely the biggest factor driving the company’s first quarter’big title‘ Miss. Royalties from sales in Europe are expected to start flowing in and reported from the second quarter earnings report.

Analysts’ comments and results:

Over the past six weeks, four analyst firms, including Raymond James and Stifel Nicolaus, have reissued buy ratings on the stock. The price targets offered range from $64 to $106 per share. On May 10, JPMorgan maintained their holding rating on the stock, but raised their price target from $30 to $34 per share.

Just over eight percent of the outstanding float of these shares is currently held short. Insiders have sold just under $100,000 of stock so far in 2022. There have been no insider stock purchases this year. The company ended the first quarter with just over $370 million in cash and marketable securities on its balance sheet against negligible long-term debt after posting a net loss of $38.6 million in the first quarter.

Verdict:

The current analysis consensus a ChemoCentryx posting a net loss of just under $2 per share as revenue more than doubled to nearly $70 million in fiscal 2022. Further improvement expected in 2022 fiscal year 2023 with revenue rising north of $190 million and net loss being reduced to around 75 cents per share.

Key objectives for 2022

May Company presentation

The company appears to be well executed on the development and deployment of TAVNEOS. The balance sheet appears to be in good shape and quarterly cash burn should start to decline as TAVNEOS gains traction on sales. Initial rollouts always seem to have some hiccups, especially for small-cap companies in this pandemic era. Analyst firms are modeling impressive revenue growth for this company.

We concluded our first ChemoCentryx review by saying it deserved a little ‘watch the article‘ position. This continues to be the case as the company pushes the development of TAVNEOS forward. Options are available against equity and they are both liquid and lucrative. Therefore, I will continue to hold my small position in this name via covered call assets.

We revel in the beauty of the butterfly, but rarely admit the changes it has undergone to achieve this beauty.. -Maya Angelou

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