CINC - CinCor Pharma Misses The Primary Endpoint But All Is Not Lost

Summary

• US biotech stocks topped the list of dissatisfied shareholders in the worst-performing US healthcare sector, and not just because of market headwinds.
• Among disappointing biotech stocks, CinCor Pharma, Inc., a US biotech developer of a high blood pressure product candidate, missed a primary endpoint in a mid-stage study. Since then, the stock plummeted.
• There's still an opportunity to develop the treatment for a specific group of Americans with high blood pressure.
• As of today, the chances of recovery are very limited, so CinCor Pharma does not appear as a purchase.
• Shares are unlikely to fall further, according to a technical indicator, so shareholders may want to wait for the outlook to become clearer.

While Strong, The Well-Known Market Headwinds May Not Be Enough to Explain the Sharp Decline in Many US Biotech Stocks

The market headwinds have been strong, as you can see from how badly they have hit US stock markets so far. Had it not been for a small recovery from late October to early December 2022, the U.S. stock market would have suffered a far larger loss than the 19.6% drop reported by the SPDR S&P 500 Trust ETF ( SPY ) benchmark index.

Pressure on consumer spending from high inflation, the dampening effect of rising interest rates on demand for housing and personal investment, and the specter of a recession expected in 2023 have spared no sector in the US stock markets, with the biotech sector setting a negative record.

US biotech stocks topped the ranking of highly dissatisfied shareholders in the worst-performing US healthcare sector, as illustrated in the following screenshot of the GuruFocus.com charts.

The US biotechnology sector is down more than 60% year-to-date and has significantly underperformed the US stock market.

Not only have biotech stocks been swamped by heightened risk aversion from investors, but the biotech industry has also been hit hard by stocks that have disappointed the market because their treatment candidate for one or a specific group of diseases has failed to produce the desired outcomes.

So, there's no point in investing in these very disappointing biotech stocks unless it's just negative market sentiment ahead of the projected 2023 recession weighing on them. Once the bearish mode is over, the sun should shine on the positions again.

Many biotechs are true deadweights for the portfolio, while resources could instead be reallocated to hedging strategies against additional downside risks expected in 2023.

CinCor Pharma, Inc. Amid US Biotech Stocks That Have Disappointed So Far

The list of disappointing biotech stocks includes CinCor Pharma, Inc. ( CINC ), a US biotech developer of a high blood pressure product candidate whose potential as a future treatment has been downgraded by the results of a mid-stage study.

CinCor Pharma, Inc.'s shares are down nearly 28% so far this year, underperforming the U.S. stock market, with most of the loss coming from the Nov. 28 announcement that its high blood pressure drug, called CIN-107 was unable to cover the main target of phase II of a clinical trial called HALO study.

After the Nov. 28 plunge, the stock has a 14-day relative strength index of 29.12 , indicating oversold levels are very close by. From these levels, there doesn't seem to be much room to expect another significant fall in the stock price, but that doesn't mean the stock is ready for a rebound, especially at a time when the stock market is expected to be largely in the red.

On the pipeline side, the company will likely seek to clarify why the product candidate failed to meet the primary endpoint of the mid-stage clinical trial and what can be done to continue to advance the evaluation.

For now, however, this stock doesn't seem to deserve a buy rating, while those who still own some shares could wait for a clearer picture in order to assess the prospects for the treatment. In the meantime, as the 14-day RSI suggests, the stock price doesn't appear to be falling any further.

About CinCor Pharma, Inc.

CinCor Pharma, Inc., headquartered in Waltham, Massachusetts, is a clinical-stage biopharmaceutical developer of drugs for the treatment of heart and kidney disease.

More specifically, CinCor Pharma is involved in the development of CIN-107, which is in a Phase II clinical trial to evaluate the product as a potential treatment for hypertension, primary aldosteronism and other cardio-renal diseases.

CIN-107 is also being evaluated in a Phase I clinical trial for the treatment of chronic kidney disease.

CIN-107 is based on Baxdrostat, which is a highly selective oral small molecule that works as an inhibitor of aldosterone synthase.

When aldosterone is inhibited, blood pressure is better controlled because the activity of angiotensin II, the main effector of blood pressure elevation, is inhibited.

Primary aldosteronism is also known as Conn 's syndrome.

In affected patients, the adrenal glands produce an excess of the hormone aldosterone, which unbalances the levels of sodium and potassium in the body. As a result, blood pressure is altered in patients with Conn's syndrome.

Hypertension means high blood pressure or blood pressure that is higher than normal. High blood pressure means the heart is working much harder to allow the blood it pumps to reach every part of the body. Over time, this hypertensive activity causes the left ventricle, the lower left chamber of the heart muscle, to thicken. A thickened left ventricle leads to an increased risk of a heart attack, heart failure and fulminant cardiac death.

Topline data from Phase II of certain clinical trials assessing the safety and efficacy of Baxdrostat given to patients affected with primary aldosteronism, some patients with non-controlled hypertension (up to 52 weeks of treatment) and patients with chronic kidney disease should be published sometime in the second half of 2023.

Financial Results for The Third Quarter of 2022

As a clinical-stage biotech developer, the company is not selling any treatments yet, so it cannot generate positive net income either.

Thus, for the third quarter of 2022 , CinCor suffered a net loss of $21 million, worsening from a net loss of $9 million for the same period in 2021.

The higher net loss year on year was mainly because of higher costs associated with the Phase II clinical trials and increased labor costs.

The Balance Sheet

As of September 30, 2022, cash and short-term investments totaled $522.5 million, an increase of 3.8x from December 31, 2021, because of CinCor going public through January 2022 IPO and a subsequent transaction resulting in common stock and pre-funded warrants offered in August 2022.

The increase in cash and short-term investments was partially offset by cash outflows from operations of $52.4 million.

CinCor Pharma is a debt-free company.

CinCor Pharma Top-Line Data from Phase 2 HALO

The Phase 2 clinical trial, called HALO , aimed to evaluate CinCor Pharma's drug called Baxdrostat, or CIN-107, in patients with high blood pressure (or hypertension) who may not respond to currently available treatments.

The clinical study did not achieve the main objective.

The Baxdrostat project, based on a multi-center randomized study, aimed to evaluate three doses of CinCor Pharma's Baxdrostat (0.5 mg, 1.0 mg and 2.0 mg) to be administered to 249 patients with hypertension. In addition, these patients had high blood pressure that was difficult to control, even though they were taking other medication for the condition at their maximum tolerated doses.

HALO clinical study failed to reach statistical significance for its primary endpoint. That is, after treatment with Baxdrostat, the systolic blood pressure [SBP] of these hypertensive patients showed no significant change from pre-treatment values.

The SBP of a hypertensive or high blood pressure patient is not less than 140 mm Hg, while the normal SBP should not be above 120 mm Hg.

However, when corrected for the effect of placebo, the research team found that in a subgroup of non-Hispanic patients, accounting for 47% of the 249 patients, treatment with a 2 mg dose has produced a 12.6 mmHg reduction in SBP, according to a specific level of significance chosen at p=0.001.

The company states that non-Hispanic patients make up approximately 81-89% of all hypertensive patients in the United States.

Therefore, this study could still serve to determine which patient population could respond to and benefit from Baxdrostat-based treatment. While the primary goal has not been pursued, a glimmer of negotiation remains for CinCor Pharma when the US biotech developer will meet with US Food and Drug Administration regulators in January 2023 to discuss the possibility of a Phase III program.

The company already anticipated initiating a pivotal phase III study sometime in the first half of 2023.

However, it should also be noted that despite the company's optimism, analysts are skeptical about the study's findings in the non-Hispanic patient population.

The results, which prompted Oppenheimer to downgrade CinCor Pharma's stock to perform from outperform, also worried the analyst over the lack of a scientific explanation for SBP's decline among non-Hispanic people. The ambiguity in this regard will not help the share price.

The Stock Valuation

Shares of CinCor Pharma, Inc. were trading at $11.89 apiece for a market cap of $505.48 million as of this writing.

As can be seen from the chart above, after last month's downturn, the stock price is trading well below the trend of the 75-day simple moving average of $24.85 and well below the midpoint of $26.84 of the 52-week range from $10.53 to $43.15.

From this level, the conditions are objectively not in place to give this stock a chance of recovery. Unless the meeting with the US regulator, who will have at least the same doubts as Oppenheimer, brings what the company hopes for: somehow the continuation of the evaluation of Baxdrostat in patients with hypertension.

However, should such a positive event materialize, it must be stronger than the following headwinds: the recession expected for 2023 plus the already known negative effects of inflation, the war in Ukraine and the tightening of the economy monetary policy.

It's going to be tough for CinCor Pharma, Inc., but everything is possible.

The stock is also unlikely to drop much further from these levels as it is effectively oversold.

Therefore, for anyone with shares of CinCor Pharma, Inc. in the portfolio, a Hold rating seems appropriate for now.

Conclusion

CinCor Pharma, Inc. conducted a Phase II study evaluating a treatment for patients with uncontrolled hypertension but failed to meet the primary study objective related to product efficacy.

Since then, the stock has plummeted, but it could be revived as the study also highlights the possibility of developing the treatment for a specific group of Americans with high blood pressure.

The chances of recovery are very limited, so CinCor Pharma doesn't appear as a purchase. Those who still own the stock, which is unlikely to fall further given oversold levels, could wait for a clearer picture from the January 2023 meeting with the FDA to assess the prospects for the treatment.

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