Why Amylyx Pharmaceuticals Blasted Nearly 79% Higher This Week
Key Points
Analysts also raised their price targets on the company.
On top of that, it launched a new round of capital raising.
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The stock of clinical-stage biotech Amylyx Pharmaceuticals (NASDAQ: AMLX) was a hot item among investors over the past five trading days.
One of its investigational medicines did very well in a late-stage clinical trial; this, combined with several subsequent analyst price target raises and the commencement of a secondary stock issue, drove Mr. Market to the shares. According to data compiled by S&P Global Market Intelligence, they ended the week with an almost 79% increase.
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Post-Phase 3 pop
On Tuesday, Amylyx published the topline results of a Phase 3 clinical trial of avexitide, a GLP-1 medication targeting post-bariatric hypoglycemia (low blood glucose levels after weight-loss surgery).
Image source: Getty Images.
The biotech's drug met its primary endpoint, demonstrating a 55% reduction in the composite rate of severe hypoglycemic events compared with placebo. It also met all of its secondary endpoints. Currently, there are no Food and Drug Administration (FDA)-approved medications to treat the disorder, hence Amylyx's big price pop after the announcement.
This was compounded by those price target hikes; indicative of that trend was the lift enacted by Guggenheim's Seamus Fernandez, who now believes the stock is worth $55 per share. That's up from his previous $40. Fernandez maintained his buy recommendation too.
Another sentiment booster was Amylyx's announcement of the fresh share issue. This was upsized considerably, from the $350 million announced on Wednesday to $500 million one day later.
Don't worry about dilution
Whenever a biotech performs well in the lab, investors tend to react positively, and avexitide was quite the success in that late-stage trial. Given that and the other green lights for Amylyx, I'm hardly surprised at the stock price jump.
My only slight concern is share dilution, however the company's market cap now tops $4.3 billion. Also, since it stated the raised funds will be used primary to support its efforts with avexitide, this will be capital well spent. This stock looks very attractive now, even after that surge.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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