Akero Therapeutic (NASDAQ: AKRO) stock is down 62% on the back of some drug testing results. The market thinks the results show complete failure - thus the crash in AKRO stock. The company itself seems to think a little differently, there’s still something there of interest seems to be their line. So it’s possible that this stock price slump is overdone. Obviously that will depend upon who we believe and how much we believe them.
What’s done at Akero: “Akero Therapeutics, Inc., a clinical-stage company, engages in the development of transformational treatments for patients with serious metabolic diseases, including non-alcoholic steatohepatitis (NASH), a disease without any approved therapies. Its lead product candidate is efruxifermin (EFX), an analog of fibroblast growth factor 21, which protects against cellular stress and regulates metabolism of lipids, carbohydrates, and proteins throughout the body. The company is also conducting a Phase 2b clinical trial to evaluate EFX in the treatment of biopsy-confirmed NASH patients.” That’s the trial we’ve just got the results from.
The company thinks those results are encouraging: “22% (28mg EFX) and 24% (50mg EFX) of patients experienced at least a one-stage improvement in liver fibrosis with no worsening of NASH by week 36, compared to 14% for placebo. 4% of patients in each EFX dose group experienced a three- or two-stage reversal of fibrosis with no worsening of NASH, compared to 0% for placebo. 63% (28mg EFX) and 60% (50mg EFX) of patients experienced NASH resolution, representing statistically significant differences compared to 26% for placebo.” This is being interpreted by the market as failure.
Akero Therapeutics stock price from Google Finance
That’s an odd reaction. After all, there are no drugs at all that work in this space. So it’s not necessary for a new drug to be perfect, or better, to gain approval. It just has to help. Which it does seem to. It’s true that this test result isn’t as good as Akero hoped, but it is statistically valid. “While investors were quick to write down FGF21 analogs, Akero argued the picture is more complex, and positive for EFX, than the primary endpoint fail would suggest. In a statement, CEO Andrew Cheng, M.D., Ph.D., said trying to show a statistically significant improvement in fibrosis by Week 36 was a “high bar.” The biotech is continuing to track patients through Week 96.”
That’s the decision that has to be made about value in Akero Thera. Is the current slump an over reaction to middling results in the test? If it is then AKRO stock looks cheap and worth tucking away for the long term. But of course there’s a significant risk in trying to take that decision.