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Alzheimer’s Drug May Mean $2 Billion Opportunity for Axovant

  • Data may send shares as high as $100, as low as $3: Jefferies
  • Company looks to break into largest opportunity in biotech

For a disease without a cure, and a field of drug development prone to disappointments, Axovant Sciences may be the next great hope.

By month’s end, pivotal results from testing Axovant’s experimental intepirdine as a treatment for patients with mild to moderate Alzheimer’s disease could point the way toward a new option for patients and set the company up to generate more than $2 billion in sales by 2023, according to estimates compiled by Bloomberg. The shares rose 1.7 percent to $25.42 at 9:37 a.m. in New York.

Positive Phase 3 data might spur shares to quadruple from recent levels, said Jefferies analyst Michael Yee, who views Axovant as an “attractive tuck-in” for a larger neurological-focused company. Yee sees a “big asymmetric upside potential on the Alzheimer’s data” and forecasts peak sales of $2 billion to $4 billion per year, if the therapy wins regulatory approval.

The stock on Friday traded as high as $27.98, the highest intraday since June 2015, the month Axovant went public. Shares had rallied more than 40 percent after Axovant on Sept. 15 listed a job on Glassdoor for a project manager to work with the team submitting its new drug application.

Shares of Axovant had a similar run in April when the company put former Medivation CEO David Hung at the helm. Hung, who sold Medivation Inc. to Pfizer Inc. for $14 billion last year, called Axovant an under-appreciated “jewel.” The company is looking to break into the largest market opportunity in the biotech sector as Alzheimer’s disease affects about 5.3 million people in the U.S.

While investors have piled into the stock ahead of the expected September readout, JMP analyst Jason Butler said failure wouldn’t be a complete shock for all. “If the data are positive, this is definitely a $2 billion drug,” he said. “But if you’re investing ahead of this data you know it is a high-risk, high-reward opportunity.”

Key companies with Alzheimer’s treatments are Allergan, Eisai and Otsuka, according to Bloomberg Intelligence. AstraZeneca, Eli Lilly, Biogen, Merck & Co. and Roche are also developing new drugs for the disease.

Jefferies (Michael Yee)

  • Says the study has a 50%-60% chance of being statistically significant, which would allow investors to ascribe a multibillion-dollar sales opportunity
  • If the data meet both primary endpoints, AXON could open in the $80 to $85 per share range and climb to more than $100
    • Notes takeover value would rise even higher; Axovant has “attractive tuck-in value” for a larger company focused on neurological care
  • Stock could open at $40-$45/share and climb to $75+ if data are significant, but have a modest effect since intepirdine would likely be approvable
  • Shares could open as low as $3-$10/share if the study fails on both main goals
  • Comments from note dated Sept. 13

Oppenheimer (Jay Olson)

  • Believes “Mindset” study has the power to detect a 1 point difference on each endpoint
  • Sees a greater than 50% probability of success for the data to be sufficient for FDA approval; says stock would likely double if data are positive and have a benefit similar to Phase 2
  • Sees nelotanserin as providing a floor for AXON shares; would view stock dropping below $10 in the event of a failure as a buying opportunity
  • Sees possibility of intepirdine being used in combination with BIIB’s aducanumab
  • Comments from email interview with Bloomberg News

JMP (Jason Butler)

  • Sees 65% probability of success; however, it “wouldn’t be a huge surprise if the trial doesn’t succeed” 
  • Positive data would be a boon for the sector overall
  • AXON could trade in the $50-$60 range if significant, “wouldn’t be surprised” to see the stock touch $100 per share
  • Stock could trade in the range of $8-$10 if the data fails on both endpoints, notes a drop to the single digits would be an over reaction
  • Comments from phone interview with Bloomberg News

— With assistance by Jared S Hopkins, and Cristin Flanagan

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