In a shocking turn of events, shares of Akero Therapeutics (AKRO) and 89bio (ETNB) took a nosedive on Tuesday, leaving investors in a state of panic.
The immediate cause? Akero’s liver-disease treatment, aimed at tackling the severe condition of nonalcoholic steatohepatitis (NASH), didn’t quite live up to expectations in a midstage study, sending AKRO stock plummeting by 50%, while ETNB stock saw a massive drop of over 37%. But is the situation as dire as it seems?
Race to Cure NASH: The Stakes are High
Akero and 89bio were both in a tight race to develop drugs that mimic the metabolic hormone FGF21 to treat NASH, a liver disease that affects millions of people worldwide.
For those suffering from the most severe form of NASH, cirrhosis, the stakes couldn’t be higher. Without a liver transplant, the odds of survival past five years are bleak.
To gain approval, a drug must achieve the delicate balance of improving liver scarring without making NASH worse, or it can resolve NASH without worsening the condition.
In Akero’s 36-week study, the results showed that 22% to 24% of patients on the drug experienced a one-stage improvement in fibrosis compared to 14% of the placebo group.
While this result wasn’t statistically significant, it is essential to note that 63% of the low-dose group and 60% of the high-dose group achieved complete NASH resolution, compared to just 26% of placebo recipients. This was statistically significant.
The Stock Shock: Oversold or Justified?
Despite the statistical significance of the NASH resolution benefit, both AKRO and ETNB stocks took a hit on Tuesday. Akero shares dropped a jaw-dropping 62.6% to close at $18.15, while rival 89bio saw a 37.1% tumble to end at $9.78. However, there is hope on the horizon.
Leerink Partners analyst Thomas Smith believes that the market’s reaction might be an overreaction.
He states, “While the fibrosis benefit was not statistically significant at 36 weeks, we believe this represents one of the strongest (effectiveness) data sets in this difficult-to-treat population to date.”
Smith sees the NASH resolution benefit as a clear sign of the drug’s approvability, especially for the advanced fibrotic population.
Smith goes further, predicting that 89bio may outpace Akero in the race. One of the key reasons behind this prediction is the dosing frequency. Patients need to take 89bio’s drug only once every two weeks, compared to Akero’s weekly dosage.
Additionally, 89bio has reported fewer gastrointestinal side effects, making patient compliance more likely, a crucial factor in drug adoption.
AKRO And ETNB: What Lies Ahead?
While Akero Therapeutics and 89bio may have taken a significant hit in the stock market, the battle to cure NASH is far from over. The potential for these drugs to make a life-changing difference for NASH patients remains significant.
The oversold stocks might just be an opportunity for shrewd investors to make a calculated move in the biotech sector.
As the story unfolds, the biotech industry continues to offer exciting opportunities and hope for those affected by NASH, reminding us that in the world of stocks, it’s not always about the current price but the future potential that truly matters.