Shares of Akero Therapeutics and 89bio crashed Tuesday after Akero's liver-disease treatment fell short in a midstage study. AKRO stock lost half its value and ETNB stock plunged more than 37%.
Both companies are testing drugs that mimic a metabolic hormone called FGF21 to treat nonalcoholic steatohepatitis, or NASH. Akero hopes to make a difference for patients with cirrhosis, the most severe form of NASH. Without a liver transplant, only half of these patients will survive for five years.
To gain approval, a drug must improve liver scarring known as fibrosis without leading to worsening NASH — defined as the presence of fatty liver disease. Or, a drug can resolve NASH but it mustn't cause worse NASH.
Over 36 weeks, 22% to 24% of patients who received Akero's drug had at least a one-stage improvement in fibrosis compared to 14% of the placebo group. The result wasn't statistically significant. But 63% of the low-dose group and 60% of the high-dose group experienced complete NASH resolution vs. just 26% of placebo recipients. That result was statistically significant.
But AKRO stock and ETNB stock fell sharply on Tuesday. Akero shares plummeted 62.6% to 18.15 on the stock market today. Shares of rival 89bio tumbled 37.1% to close at 9.78.
AKRO Stock Undercuts 50-Day Line
However, Leerink Partners analyst Thomas Smith says the moves for AKRO stock and ETNB stock are overdone.
"While the fibrosis benefit was not statistically significant at 36 weeks, we believe this represents one of the strongest (effectiveness) data sets in this difficult-to-treat population to date," he said in a report. "Importantly, the NASH resolution benefit remains clear and is further supportive of approvability in the advanced fibrotic population where both Akero and 89bio have already reported strong Phase 2b data."
Ultimately, Smith expects 89bio to pull ahead of rival Akero. Patients must take 89bio's drug once every two weeks vs. Akero's, which is given weekly. Further, 89bio has reported lower gastrointestinal side effects related to its drug. Both aspects are "critically important for driving patient compliance," he said.
He kept his outperform rating on ETNB stock and doesn't have a rating on AKRO stock.
The news sent Akero shares to their lowest point in 13 months, while 89bio stock fell to its lowest point since December. Shares of both companies undercut their 200-day moving averages, MarketSmith.com shows. AKRO stock also fell below its 50-day line.
Both are highly rated stocks, however. AKRO stock has a Relative Strength Rating of 90, while ETNB stock's RS Rating is higher at 93. The RS Rating is a 1-99 measure of a stock's 12-month performance, according to IBD Digital.
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