Centessa Pharmaceuticals has a potential blockbuster narcolepsy treatment on its hands, an analyst said Tuesday as the biotech stock surged early on test results in healthy people.
The company studied two doses of its drug in healthy, but acutely sleep-deprived, volunteers. The higher 2.5-milligram dose restored normal wakefulness. It took recipients 32 minutes to fall asleep compared to 17 minutes for placebo recipients.
Centessa's drug works by targeting orexin, a neuropeptide that regulates wakefulness. These drugs are often cause visual disturbances and hallucinations. But none of the ORX750 patients had any of the side effects tied to the orexin drug class. Further, there were no issues of liver toxicity, urinary urgency, insomnia, or increases in blood pressure or saliva production.
Leerink Partners analyst David Risinger estimates Centessa has a $5 billion-plus opportunity with ORX750 in narcolepsy type 1 and 2, and idiopathic hypersomnia. The company is planning to "rapidly initiate" Phase 2 studies of ORX750 in those patients.
"Compared to competing orexin programs, we view ORX750's initial clinical data as having a best-in-class profile," he said in a note to clients.
Centessa stock initially surged as high as 16% and hit their highest point since October 2022. But the biotech stock closed down 2.3% at 14.58. Centessa is highly rated with an IBD Digital Relative Strength Rating of 98. This means the biotech stock's 12-month performance ranks in the top 2% of all stocks.
Biotech Stock: Important Nuances
Investors already expected a strong outcome from Centessa's study, Evercore ISI analyst Umer Raffat said in a report.
"However, there are nuances beyond the obvious which give us more confidence in this program," he said.
He notes Centessa tested a single dose of its drug. But visual disturbances and hallucinations often occur after multiple doses of orexin-based therapies. But Centessa is also running an ascending dose study. In this format, patients will receive increasing dosages over time.
"If their body language is as positive on safety as it is, it means so far so good in (multi-ascending dose testing) on safety — which is very important," he said.
Notably, Takeda Pharmaceutical is also testing a narcolepsy drug. That drug was able to extend the length of time it took healthy volunteers to fall asleep by 38 to 39 minutes. But the company later had to lower its doses in a study of patients with narcolepsy type 1.
Raffat kept his outperform rating on biotech stock Centessa.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
