ABBV - AbbVie's $60 Million Bet On Penny Stocks
Let me ask you a question: Why would anyone buy penny stocks? Is it because they saw the Wolf of Wall Street or Boiler Room and want to feel a rush of adrenaline? Maybe they saw the movie Wall Street and just want to feel like Bud Fox for a day. All kidding aside though, there’s some truth to this.
The idea of making money – big money – with a small investment is something traders from all walks aim for. What separates the wins from the losses is risk management and for some, foresight and diligence that can set you up for a win. One of the hottest sectors that continues to show big potential is healthcare. Specifically, biotech penny stocks have offered big potential for investors.
While early-stage companies are highly volatile and the outlook is usually uncertain, their nimble ability to get treatments to a viable point has been proven countless times. The past history of this sector shows the “penny stock dream” in its guest form. This is where you hear about the stocks under $5 getting big offers from market leaders and producing big wins.
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How big of a win depends a lot on specific companies. Today, AbbVie Inc. (ABBV Stock Report) just “blessed” one penny stock company with a deal that could be worth nearly $1 billion. On Thursday, Alpine Immune Sciences (ALPN Stock Report) and AbbVie announced an option and license agreement to develop and commercialize Alpine’s ALPN-101.
What Is ALPN-101?
Essentially, ALPN-101 is a therapy that has shown numerous indications with in vivo settings. These include arthritis, colitis, lupus, multiple sclerosis, and sialadenitis. Generally speaking, the drug aims to help with anti-inflammatory & autoimmune properties.
According to Alpine, ALPN-101 has the potential to improve outcomes in patients suffering from severe autoimmune/inflammatory disease. ALPN-101 completed enrollment of a Phase 1 healthy volunteer study in October 2019. Final data were presented at the 2020 EULAR E-Congress earlier this month.
In its poster presentation, the following conclusions were arrived at:
- ALPN-101, a first-in-class dual CD28/ICOS inhibitor, was well tolerated in healthy volunteers with dose-dependent PK and PD consistent with the known biology of these costimulatory pathways.
- Further study of ALPN-101 is warranted in multiple autoimmune or inflammatory diseases regulated by CD28 and/or ICOS.
- The company initiated an open-label study of ALPN-101 for the treatment of acute GVHD (NCT04227938). Studies for the treatment of other autoimmune and inflammatory diseases are being planned.
If you’re unfamiliar with AbbVie’s pipeline, it has built a pipeline and portfolio of anti-inflammatory therapies including Humira, Duodopa, Imbruvica, and Venclexta among other pipeline treatments. It’s safe to say that AbbVie’s current pipeline could be in line with what ALPN-101 has shown to address in early trials.
AbbVie Inks $60 Million Deal; Penny Stocks Rally
This specific deal has AbbVie cutting a check for $60 million upfront. The potential of this deal could reach nearly $1 billion. According to the details of the deal Alpine is eligible to receive up to an aggregate of $805 million for the exercise of the option and success-based development, regulatory and commercial milestones.
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Alpine’s also eligible to receive tiered royalties on net sales of ALPN-101. AbbVie will receive an option to an exclusive license for ALPN-101. During the option period, Alpine will move forward with a Phase 2 study in systemic lupus erythematosus. Upon exercise of the option, AbbVie will conduct all future clinical development, manufacturing, and commercialization activities for ALPN-101.
“AbbVie’s expertise in Immunology has led to remarkable breakthroughs in the treatment of autoimmune diseases. ALPN-101’s dual mechanism of action has compelling potential as a next-generation treatment in systemic lupus erythematosus and other autoimmune diseases. We are excited to partner with the team at Alpine on the development of this novel therapeutic.”
Tom Hudson, M.D., Senior Vice President and Chief Scientific Officer, AbbVie
You Haven’t Heard Of Alpine Immune Sciences?
If you haven’t heard of ALPN stock before, you’re not alone. Look at any stock chart and you’ll quickly see that the biotech stock barely trades. We’re talking a few hundred thousand shares on a “really good day”. On top of that, ALPN hit new all-time lows in March ($2.05). But after this news came to light, the ALPN stock price exploded to highs of $18.81 during pre-market trading on June 18th.
Considering that shares were trading slightly higher than $4 on Wednesday, this was big news for investors on Thursday. How big? How about 3.63x higher than ALPN stock was trading at one day prior. A caveat here is that if this is one of the penny stocks on your list, I wouldn’t be surprised to see consolidation following such a jump.
However, it is something to note in a world dominated by coronavirus headlines right now. This is a clear example of why penny stocks aren’t “all that bad”. One piece of news effectively acted as a catalyst for a 300%+ move overnight. The next focus for the market will likely be on Alpine’s next move in Phase 2 for ALPN-101. At the end of the day, do you think ALPN-101 will reach meaningful stages in AbbVie’s development pipeline?