Chinook Therapeutics wasn't looking to sell when Novartis approached. But the $3.5 billion deal might be the best bet for patients — and KDNY stockholders, says Chinook Chief Executive Eric Dobmeier.
The biotech company focuses on rare kidney diseases. It has two drugs in testing for immunoglobulin A nephropathy, or IgAN. Both could bolster Novartis' pipeline in cardio-renal diseases, analysts say.
Dobmeier says Novartis has seized onto the opportunity in kidney diseases. The space is sorely in need of more attention, research and investment. Novartis has the resources to do just that.
"We think this deal will be great for patients because Novartis can apply its resources to our programs and expand them into other indications," Dobmeier told Investor's Business Daily. "Obviously, we also think it's great for our shareholders based on the deal terms."
Chinook shares skyrocketed more than 58% on June 12, the day of the takeover announcement. Since then, KDNY stock has remained near the buyout price of $40 per share. The deal also includes a pair of contingent value rights worth a combined $4 per share tied to approvals for its lead drug, atrasentan.
KDNY Stock: An Opportunistic History
Chinook's history is a case of being in the right place at the right time.
The company started out with about 15 researchers in Vancouver, British Columbia. They planned for Chinook to do its own internal research and development. Though some of those initial programs still exist, the pivotal point came when Chinook licensed the rights to a drug from AbbVie in 2020.
Today, that drug is atrasentan, Chinook's leading drug in testing for IgAN. IgAN is a kidney disorder in which antibodies build up in the kidney tissue. This leads to damage and other kidney problems.
Also in 2020, Chinook completed a merger with Aduro Biotech. Aduro focused on cancer drugs, but it also featured a treatment in development for IgAN called BION-1301. It was through that merger that KDNY stock went live, replacing the former ADRO stock.
Dobmeier, who joined Chinook about four years ago, says the company has been very opportunistic.
"It's funny because 'opportunistic' often sounds like a negative term, but I think we've been strategic and opportunistic within that strategy, (and that) is what's made us successful," he said.
Shares Break Out On Novartis Deal
Even before the acquisition, KDNY stock had been on the rise. Shares formed a cup-with-handle base with a buy point at 25.92, according to MarketSmith.com. Shares broke out when Novartis announced the takeover plans.
Investors have recently zeroed in on the kidney diseases space. Traditionally, patients with IgAn are either placed on immunosuppressants or blood pressure-lowering medications. In February, Travere Therapeutics won Food and Drug Administration accelerated approval for the first IgAN treatment that doesn't rely solely on either of those mechanisms.
Travere's drug, dubbed Filspari, blocks endothelin and angiotensin. Endothelin is a peptide that helps regulate blood pressure by tightening blood vessels. Angiotensin is a hormone that does the same. Chinook's atrasentan blocks endothelin as well. It is undergoing tests on top of blood pressure drugs.
Dobmeier thinks Chinook's approach will be better for patients who won't have to go off their tailored blood pressure-lowering regimens before starting atrasentan. He expects to have final-phase study results for that drug in the fourth quarter.
Lowering Protein Levels
Bullishly for KDNY stock, Travere's Filspari won FDA approval based on the drug's ability to lower the level of protein in patients' urine. Heightened protein levels are indicative of kidney damage. Dobmeier says atrasentan lowered protein levels by more than 50% in midstage testing of IgAN patients.
"We're optimistic we're going to see good data when that (Phase 3 study) reads out," he said.
Meanwhile, Chinook is testing another IgAN treatment called BION-1301. This drug uses a different mechanism to lower protein levels, and it could complement atrasentan. In testing so far, this second experimental IgAN treatment has lowered protein levels by 50%-70%, Dobmeier said. But final-phase test results are still several years out.
Chinook also has another drug in testing for kidney stone disease, fitting into Chinook's ultimate hope: that dialysis and kidney transplants will become a thing of the past for most people.
"A lot of the health care dollars we're spending on kidney disease are focused on patients whose kidneys have already failed and who need dialysis or transplant, which are both very expensive and not very good quality of life situations for patients," Dobmeier said.
Highly Rated KDNY Stock
With the Novartis deal on deck to close in the second half of the year, KDNY stock now has a strong Relative Strength Rating of 98 out of a best-possible 99. This puts Chinook's stock performance in the top 2% of all stocks, according to IBD Digital.
But Chinook's RS Rating was already on the rise before the Novartis deal. Dobmeier says Travere's approval based on lowered protein levels bodes well for Chinook's atrasentan, and KDNY stockholders were already paying attention.
"Our mission is to make dialysis and transplant unnecessary for most patients," he said.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
