Tero Vesalainen/Dreamstime.com
Biotech investors bet on a lot of losers while they hunt for the big winners that make it all worthwhile. A healthcare portfolio that held shares of
(ticker: MRNA) and
(BNTX) over the past year or so would have done pretty well, even if much of the rest of the stocks in it were duds.
The trick is finding those winners before the flock. Ziad Bakri, the stock picker who runs the
T. Rowe Price Health Sciences fund
(PRHSX), has a possible big one up his sleeve:
(ARGX), a Dutch biotech with a substantial $15.2 billion market value and no products on the market yet.
That’s a lot for a clinical-stage company, but Bakri says that the company is a ripe acquisition target, and when that acquisition comes, it will go for a steep price.
Argenx’s attraction is a drug called efgartigimod, which the company is testing in six different diseases. The U.S. Food and Drug Administration is currently reviewing Argenx’s application for approval for efgartigimod as a treatment for generalized myasthenia gravis, with a decision is due by mid-December.
“I actually think that could be a five billion-plus drug on its own,” Bakri says of efgartigimod. He compares Argenx to the pharmaceutical unit of
(BASFY), which
(ABT) bought for about $6 billion in late 2000, acquiring the rights to Humira, the bestselling drug in the world in recent years.
“You’d pay a lot,” he says of a potential acquirer of Argenx. But, in return, “you could have something that could carry you for a long time. There aren’t many things that you could dream really blue sky numbers like this.”
Efgartigimod is a so-called anti-FcRn antibody. It’s intended to replace intravenous immunoglobulin therapy, a treatment made from human blood plasma that is the standard of care for a number of autoimmune diseases. In addition to myasthenia gravis, Argenx is developing efgartigimod in primary immune thrombocytopenia, pemphigus vulgaris, and other indications.
A handful of other companies are also developing anti-FcRn antibodies, but Argenx has the lead.
(JNJ) bought a company called Momenta Pharmaceuticals late last year for $6.5 billion, grabbing with it an anti-FcRn antibody called nipocalimab that could at some point challenge efgartigimod.
One competitor,
(IMVT), paused a trial of its FcRn inhibitor in February after patients who received the drug showed higher cholesterol levels. The company has since said it plans to resume the trials. Argenx said at the time of the trial pause that it had measured cholesterol levels in hundreds of patients who received efgartigimod, and that it had seen no increase.
Argenx shares fell 3.6% on June 7, after Johnson & Johnson ended a collaboration on another drug in Argenx’s pipeline, an anti-CD70 antibody called cusatuzumab. The companies had begun collaborating in 2018, and are testing the drug in acute myeloid leukemia. Argenx said it would continue to develop the drug, but Wedbush analyst
David Nierengarten
on June 7 wrote that even without cusatuzumab, the stock is underpriced.
“We see significant upside from these levels from efgartigimod’s potential; with an unencumbered first-in-class and best-in-class (in our view) FcRn inhibitor, we believe large pharma companies are natural acquirers for a potential multibillion franchise,” Nierengarten wrote.
Bakri, too, is largely focused on efgartigimod. ”There are dozens of diseases it can go after,” he says. “It could be one of the biggest specialty drugs, given the disease it could solve.”
Argenx’s Nasdaq-listed American depositary receipt is up 7% so far this year, and 46.3% over the past 12 months. Of the 22 analysts tracked by FactSet who cover the stock, 13 rate it a Buy or Overweight, while nine rate it a hold. Their mean target price is $331.26, implying a 5.3% return over the recent price of $314.46.
Write to Josh.Nathan-Kazis@barrons.com
