Behind The Enormous Rally In Longboard Prescription drugs (NASDAQ:LBPH)

A person can’t be snug with out his personal approval.” ~ Mark Twain.

At this time, we take a deeper take a look at Longboard Prescription drugs, Inc. (NASDAQ:LBPH), whose shares have rocketed up early in 2024 on mid-stage trial information. The corporate took benefit of the large rally in its inventory to do a big capital elevate through a secondary providing. Can the rally proceed, or is it time to take some income? An evaluation follows beneath.

Firm Overview:

Longboard Prescription drugs is situated proper outdoors of San Diego in La Jolla, CA. This scientific stage biotech concern is concentrated on growing novel and transformative medicines for neurological illnesses. The inventory presently trades proper at $25.00 a share and sports activities an approximate market capitalization of $910 million.

Longboard was launched early in 2020 by Area Prescription drugs, Inc., which was bought by Pfizer (PFE) in 2022. The brand new entity’s objective was to advance a portfolio of centrally-acting product candidates designed to be extremely selective for particular G protein-coupled receptors (GPCRs).

The corporate is growing its drug candidate through a GPCR analysis platform that was created by Area Prescription drugs.

Latest Developments:

On the primary buying and selling day of 2024, the corporate launched very optimistic information from a section 1b/2a research round its lead drug candidate LP352, also called bexicaserin. This trial “PACIFIC” was evaluating bexicarserin within the therapy of sufferers with developmental and epileptic encephalopathies or DEEs. LP352 is a 5-HT2C Superagonist. Preclinical and scientific information have proven 5-HT2 receptor agonists being efficient potential therapies for quite a lot of motor seizures and seizure issues.

The information confirmed a median seizure discount of 53.3% in countable motor seizures. This in contrast with simply 20.8% for the placebo group. As well as, the drug produced a “median seizure discount of 72.1% for Dravet Syndrome, 48.1% for Lennox-Gastaut Syndrome and 61.2% for different DEE situations” in line with administration. The information additionally confirmed a robust security and tolerability profile for the compound.

The information triggered an enormous rally within the inventory, comprehensible given bexicarserin doubtlessly may evolve right into a better of bread therapy for a market inhabitants of simply over 100,000 people in america. LP352 is designed to be extra selective and particular than different molecules. Management’s targeted now’s to effectively put collectively a world registrational Section 3 research that ought to result in FDA approval, offered it could actually produce comparable information.

To supply the funding for these efforts, administration executed a secondary providing late final week that raised roughly $210 million for the corporate whereas being dilutive to present shareholders.

The corporate additionally has a compound referred to as LP659 that’s simply getting into early Section 1 growth.

Analyst Commentary & Stability Sheet:

Since these trial outcomes got here out final week, Cantor Fitzgerald ($55 value goal, up from $35 beforehand), JonesTrading ($35 value goal) and Evercore SI ($46 value goal, up from $25 beforehand) have all reiterated Purchase rankings on the inventory. Of word, Cantor and Citigroup had been the lead bookrunners on the corporate’s latest secondary providing.

Roughly 4 % of the excellent float within the shares is held brief. The corporate ended the third quarter with $56 million in money and marketable securities, after which executed the simply over $200 million secondary providing this month. Complete working and R&D bills ran just below $14 million in the course of the third quarter.

Verdict:

LP352 is focusing on a big potential market alternative, so it’s comprehensible why encouraging mid-stage trial information is igniting a big rise within the inventory. That mentioned, Longboard Prescription drugs, Inc. nonetheless has to place collectively and execute a big and international Section 3 research to provide outcomes on a bigger scale to garner FDA approval. This implies Longboard is a few years away from any potential commercialization.

Subsequently, whereas this an intriguing story, I’d not be chasing the large rally within the shares. If the inventory succumbed to some revenue taking that introduced the shares again right down to the $20 degree, I’d in all probability take a small “watch merchandise” holding in LBPH at the moment. Of word, there are not any choices but towards this fairness. This makes my most popular entry technique of coated name orders non-viable in the mean time on Longboard. Buyers ought to get extra particulars of the potential Section 3 research guideline when administration hosts a convention name following its fourth quarter earnings launch. This could happen in early March.

Principally it’s loss which teaches us in regards to the value of issues.”― Arthur Schopenhauer.