Axcella Health (NASDAQ: AXLA) stock is up 22% premarket. The AXLA stock price rise is a repeat of that excitement about a patent on their long covid treatment. Patents have a value, sure they do. In fact in drug development they are, in the end, the value. The manufacturing cost of any particular treatment is usually near spit. So, it’s only the patent that protects margins for that approximately 10 years a producer has before generics arrive. So, yes, patents are valuable.
Patents are also easy to get in drug development. It is, pretty much: “Hey, USPTO, we#’ve something new!” “Here you are, Son”. Yes, OK, more than a bit flippant but not too much to get the point across. What matters is the FDA approval to be able to sell the drug or treatment. The patent protects that value, sure it does, but the patent is the easy part and comes a long time before the FDA.
As we’ve said before about Axcella: “AXLA stock jumped on the announcement of their receipt of a patent on their long covid treatment. Getting a patent is nice, it sure is. But it’s not in fact, a proof of anything. To get a patent you show that what you’ve got is new, the patent is issued. This does not mean that what you’ve got works. Not in any sense at all does this patent mean that it actually cures or even helps with long covid. There’s still the long slog through the FDA testing process to go. First to prove that it doesn’t not work - ie poison people - then to prove that it does work and finally, only then, can it go on sale. The usual estimate is that it takes 10 years to go through this process.
Axcella might have something here but it’s still going to be years before we find out.”
Note that our earlier warning was at that peak of 45 cents - we got that one right then.
We also looked earlier, around the time of the permission to do a reverse stock split, at Axcella: “And, well, yes, that’s clearly necessary in order to keep the NASDAQ quotation. They’re well below the $1 minimum bid price and given that they will need more capital soon enough they’d be well advised to stay on NASDAQ where it’s easier to raise capital. But a reverse stock split is a pretty normal thing to do. It’s an obvious thing to do as well. So it’s not really 80% value additive. Especially as we very strongly suspect that seen after such a reverse split there would be another capital raise.”
We’re definitely going to stick with that last prediction too. Any sustained or gross move upwards in the Axcella stock price is going to be met with a capital raise.