Netherlands-based, emerging biotech star arGEN-X gives shareholders two doses of great news; stock skyrockets.

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The News:

arGEN-X SE (Breda NLD) has smoked its target of $150 million for a US stock offering, which will support its cancer and autoimmune disease antibodies through the clinical phases. The Dutch biotech on Monday (December 18, 2017) announced that it has raised a whopping $266 million in gross proceeds.

The company, developing a deep pipeline of differentiated antibody-based therapies, said it closed its public offering of 5,106,000 American Depositary Shares (ADSs), at a price of $52.00 per ADS. This includes the full exercise of the underwriters’ option to purchase additional ADSs. Each of the ADSs offered represents the right to receive one ordinary share, nominal value of €0.10 per share.

Although the offering initially resulted in a 4% decrease in the company’s stock price on Nasdaq, that would be fully expected to correct itself as the market adjusts to the sudden inflow of new shares. And it did, with shares rising 11% to $57.51 by midweek. The extra money should give the company a big boost, helping it bring its pipeline through the next battery of clinical trials.

This caps off a great week for arGEN-X following its just publicized Phase 2 success with ARGX-113 (efgartigimod), in which the antibody therapy has proved to provide a significant improvement in patients with generalized myasthenia gravis, a form of the disease that affects the strength of multiple muscles simultaneously.

According to Labiotech.eu, a total of 24 patients were recruited for the trial. They all received the standard care for myasthenia gravis (corticosteroids and/or immunomodulatory agents) in addition to four weekly doses of either ARGX-113 or placebo. After 6 weeks, 75% of patients treated with ARGX-113 showed a significant improvement in their symptoms, compared to just 25% of those receiving the placebo. A clear improvement was seen starting from the first week after the first infusion.

ARGX-113 is an antibody developed using arGEN-X’s ABDEG technology to engineer antibodies and make them attack the patient’s own antibodies. In particular, ARGX-113 blocks a receptor called FcRn, which is involved in the recycling of IgG antibodies. This leads to a rapid depletion of the IgG autoantibodies that cause autoimmune disease by reacting against the body’s own cells. In this case, the target disease is myasthenia gravis. But arGEN-X thinks the same principle could benefit patients with other autoimmune diseases.

ARGX-113 is being tested in another two Phase 2 proof-of-concept studies in the blood disorder immune thrombocytopenia and the skin blistering disease pemphigus vulgaris. Results from both are expected in the second half of 2018.

Steve’s Take:

In the antibodies field, arGEN-X will likely butt heads with the likes of MorphoSys AG (Planegg DEU), which had its first antibody approved after 25 years of hard work, and is developing candidates for cancer, including its MOR208 candidate.

How did markets react to the Dutch-company’s double dose of good news?

You guessed it. arGEN-X (Nasdaq:ARGX) soared 91% to an all-time high of $58.21 last week. Shares have retreated just 1.2% after the positive Phase 2 ARGX-113 data, and the follow-on public offering of $266 million worth of shares.

But there’s even more good news.

Piper Jaffray analyst Edward Tenthoff raised his price target for arGEN-X to $100, citing last week’s positive efgartigimod data. The analyst believes these data validate efgartigimod’s mechanism of targeting FcRn to lower auto-antibodies to treat a broad range of autoimmune diseases. He reiterates an Overweight rating on arGEN-X shares.

But let’s look at some important numbers amid all the euphoria, recently.

KEY FINANCIAL DATA:

Shares have a 52-week range of $17.33-$69.27. That’s a 406% spread; volatile to say the least.

Market Cap = $1.517 billion. We call this a “small cap.”

Shares outstanding = 26.89 million

Financials (€)
Sales 2017 41,0 M
EBIT 2017 29,6 M
Net income 2017 -23,8 M
Debt 2017
Yield 2017
Sales 2018 26,0 M
EBIT 2018 -58,8 M
Net income 2018 -50,5 M
Debt 2018
Yield 2018
Capi. / Sales 2017 37,5x
Capi. / Sales 2018 59,3x
Market Cap 1.540M

Bottom Line:

Up to October 2017, there had been no new FDA-approved treatments for generalized myasthenia gravis in over 60 years. US-based Alexion Pharmaceuticals Inc. (New Haven CT) stopped this long streak with the approval of Soliris (eculizumab), an antibody targeting up to 15% of patients with myasthenia that test positive for antibodies against anti-acetylcholine receptor (AchR), who often present more severe symptoms and fail to respond to existing treatments.

Steve's Take: I recommend arGEN-X to the high-risk tolerant investor in the short-run Click To Tweet

By comparison, arGEN-X’s ARGX-113 candidate is not limited to the expression of any marker, which some analysts say could give the company a big competitive advantage. I believe this advantage is being under-weighted and that Piper Jaffray’s $100/share price target recognizes this. Such target reflects a 74% upside from the Dutch company’s recent closing price of $57.51 on Wednesday, December 20, 2017.

Although clearly not suited for the risk-averse portfolio–because there’s plenty of it in this situation—I recommend the high-risk tolerant investor buy a small position in this name while waiting for the upcoming Phase 2 trial data later next year. Otherwise, arGEN-X is worth placing on your watch list. I’ll keep you apprised.

Steve Walker has no position in any stocks mentioned. MedContent Inc. has no position in any stocks mentioned. MondayMorning.com has a disclosure policy.