Spooked Investors Send Axovant Sciences Ltd (AXON) Shares Spiraling; Here’s Why

Some investors might love biotech stocks for their lottery ticket-like returns when a company strikes medical gold. A lottery ticket, however, costs only a buck or two, while getting a biotech company wrong can hurt a lot more than that. Case in point: Axovant Sciences Ltd (NASDAQ:AXON) is crashing 50% on Monday, after announcing the discontinuation of the intepirdine program based on results from MINDSET, HEADWAY, and gait and balance studies.

Axovant CEO David Hung commented, “Based on the totality of intepirdine data to date, there is no evidence to support its further development. We are incredibly disappointed and saddened for the millions of people living with these difficult conditions, and are deeply grateful to the patients, caregivers and investigators who participated in our trials.”

Chardan analyst Gbola Amusa opined, “This definitive outcome for intepirdine is in line with our long-held, bearish, and highly counter-consensus views on intepirdine […] The results of the HEADWAY trial announced today showed no significant improvements for patients treated with intepirdine compared to patients on placebo, at either the 35mg or the 70mg intepirdine dose. Indeed, the low dose of intepirdine actually caused a numerical worsening of motor function (as measured by UPDRS Part III) and of cognition (as measured by ADAS-Cog). The higher 70mg dose showed immaterial improvements over placebo in motor function (p=0.158), cognition based on ADAS-Cog (p=0.527), and CIBIC+ (P=0.701). Recall that the CIBIC+ score was one of the 2 original primary endpoints for this study; primary endpoints were modified in November 2017. For the study of intepirdine in patients with dementia and gait impairment (NCT02910102), the 35mg dose of intepirdine also numerically worsened speed compared to placebo. We took the counter-consensus view these results would be negative based on considerations discussed in our 26 September 2017 research.”

Amusa reiterates a Sell rating on AXON, with a price target of $2.50, which represents a potential downside of 12% from where the stock is currently trading. Separately, on December 21, Jefferies’ Michael Yee downgraded the stock to Hold and has a price target of $6.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Gbola Amusa and Michael Yee have a yearly average return of 7.5% and 6.5% respectively. Amusa has a success rate of 50% and is ranked #878 out of 4754 analysts, while Yee has a success rate of 53% and is ranked #976.

Overall, one research analyst has rated the stock with a Sell rating, 2 research analysts have assigned a Hold rating and 2 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $11.13 which is 290.5% above where the stock opened today.

Axovant is a clinical-stage biopharmaceutical company, which engages in the acquisition, development, and commercialization of novel therapeutics for the treatment of neurodegenerative disorders. It offers RVT-101 product which is an orally administered therapy that improves cognition and daily functioning of dementia patients.