Long
CCXI is undervalued ahead of 4 catalysts
Trade Summary
Ticker: CCXI (Last: $8.84)
Entry: $8.50-8.84
Price Target: $13-15.0+
Target Timeframe: 0-6 weeks
Trade Thesis
CCXI is an orphan/rare disease-focused company with a robust pipeline of clinical assets targeting autoimmune and inflammatory disorders as well as cancer. The company's lead asset CCX168 (Avacopan) is an orally administered small molecule being tested as a treatment for 3-indications. The most advanced of which is a pivotal phase 3 study in patients with ANCA associated vasculitis (AAV). Topline data is due this quarter. A key differentiator discussed by Nick Dinh, PharmD in this article between Avacopan and its failed peers is its ability to selectively inhibit parts of the complement system. In doing Avacopan avoids over-suppressing the patient's immune system.
On June 5th, 2019 CCXI dropped -20% in response to the failure of its competitors InflaRx (Nasdaq: IFRX) lead asset (IFX-1) in phase 2. The market, in turn, failed to realize is that the mechanism of action of IFX-1 is distinctly different from Avacopan. Avacopan is a small molecule, unlike IFX-1 which is an antibody. The share price continued to decline and hit a new 52-week low of $6.16 in August following weak Q2 earnings. The stock price was resurrected after a J.P. Morgan analyst upgraded them to overweight and commented that CCXI's phase 3 ADVOCATE trial "has a high probability of success and the stock could rally +90-110% if successful, or fall -45-80% if it fails.
To succeed Avacopan must prove non-inferior to the standard of care (SOC)(Rituximab or Cyclophosphamide and steroids). In phase 2 Avacopan hit its primary endpoint and demonstrated comparable efficacy (if not superior) to the SOC. Based on comments by the CEO, and the fact the management decided to withdraw its conditional marketing application in Europe so they could instead submit the phase 3 data due this quarter in support of full marketing authorization, and an NDA in the U.S, I bullish on the data readout. Of note, in May 2016 Vifor Pharma licensed Avacopan from CCXI gaining rights for areas outside the U.S. The deal was pretty sweet for CCXI and came with an upfront cash payment of $60 million, royalties, and milestone payments. Additionally, in 2016 CCXI was awarded PRIME designation by the EMA.
On top of all this, there are 3 three more data catalysts coming in 2020 for a total of 4-shots on goal. CCXI is still down -22% since the IFRX data drag down. Consequently, positive data is not baked into the share price.CCXI's stock price should bounce into the second half of Q4. Heavy call option volume for Dec. 20th @$13 strike suggests the market is optimistic.
Key Focus
Phase 3 ADVOCATE top-line data due Q4 2019.
Technicals
RSI= 53 on the daily chart.
Nearing a recent support level at $8.52
The next support level is $7.70
The 9-day EMA is holding above the 20-day and 200 day EMAs.
(Assuming an $8.67 entry)
Risk Assessment
To mitigate the downside risk we can hedge by buying puts (Dec. 20th @$8.00 strike). I am looking to enter on any dips next week and am shooting for a cost basis below $8.84.
Reward Potential and Price Targets:
+14% ($9.90)
+28% ($11.11)
+49% ($13.00)
+73% ($15.00)
I (Sultan) have no position but intend to buy shares and/or call/put options next week. CCCXI
Ticker: CCXI (Last: $8.84)
Entry: $8.50-8.84
Price Target: $13-15.0+
Target Timeframe: 0-6 weeks
Trade Thesis
CCXI is an orphan/rare disease-focused company with a robust pipeline of clinical assets targeting autoimmune and inflammatory disorders as well as cancer. The company's lead asset CCX168 (Avacopan) is an orally administered small molecule being tested as a treatment for 3-indications. The most advanced of which is a pivotal phase 3 study in patients with ANCA associated vasculitis (AAV). Topline data is due this quarter. A key differentiator discussed by Nick Dinh, PharmD in this article between Avacopan and its failed peers is its ability to selectively inhibit parts of the complement system. In doing Avacopan avoids over-suppressing the patient's immune system.
On June 5th, 2019 CCXI dropped -20% in response to the failure of its competitors InflaRx (Nasdaq: IFRX) lead asset (IFX-1) in phase 2. The market, in turn, failed to realize is that the mechanism of action of IFX-1 is distinctly different from Avacopan. Avacopan is a small molecule, unlike IFX-1 which is an antibody. The share price continued to decline and hit a new 52-week low of $6.16 in August following weak Q2 earnings. The stock price was resurrected after a J.P. Morgan analyst upgraded them to overweight and commented that CCXI's phase 3 ADVOCATE trial "has a high probability of success and the stock could rally +90-110% if successful, or fall -45-80% if it fails.
To succeed Avacopan must prove non-inferior to the standard of care (SOC)(Rituximab or Cyclophosphamide and steroids). In phase 2 Avacopan hit its primary endpoint and demonstrated comparable efficacy (if not superior) to the SOC. Based on comments by the CEO, and the fact the management decided to withdraw its conditional marketing application in Europe so they could instead submit the phase 3 data due this quarter in support of full marketing authorization, and an NDA in the U.S, I bullish on the data readout. Of note, in May 2016 Vifor Pharma licensed Avacopan from CCXI gaining rights for areas outside the U.S. The deal was pretty sweet for CCXI and came with an upfront cash payment of $60 million, royalties, and milestone payments. Additionally, in 2016 CCXI was awarded PRIME designation by the EMA.
On top of all this, there are 3 three more data catalysts coming in 2020 for a total of 4-shots on goal. CCXI is still down -22% since the IFRX data drag down. Consequently, positive data is not baked into the share price.CCXI's stock price should bounce into the second half of Q4. Heavy call option volume for Dec. 20th @$13 strike suggests the market is optimistic.
Key Focus
Phase 3 ADVOCATE top-line data due Q4 2019.
Technicals
RSI= 53 on the daily chart.
Nearing a recent support level at $8.52
The next support level is $7.70
The 9-day EMA is holding above the 20-day and 200 day EMAs.
(Assuming an $8.67 entry)
Risk Assessment
To mitigate the downside risk we can hedge by buying puts (Dec. 20th @$8.00 strike). I am looking to enter on any dips next week and am shooting for a cost basis below $8.84.
Reward Potential and Price Targets:
+14% ($9.90)
+28% ($11.11)
+49% ($13.00)
+73% ($15.00)
I (Sultan) have no position but intend to buy shares and/or call/put options next week. CCCXI
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