ICPT - Circling Back On CymaBay Therapeutics

2023-11-19 09:52:24 ET

Summary

• Today, we revisit CymaBay Therapeutics, a clinical stage biopharma company focused on developing therapies for liver and chronic diseases.
• The company's primary product candidate, seladelpar, has shown positive results in treating primary biliary cholangitis (PBC), and is proceeding towards approval and a 2025 launch.
• Analyst firms are positive on the company's prospects despite a large recent rally in the stock. Insiders have sold a decent amount of shares in recent months.
• Buy, Sell or Hold? An analysis follows in the paragraphs below.

For avarice begins where poverty ends ."? Honoré de Balzac

It has been just over six months since we last took a look at CymaBay Therapeutics, Inc. ( CBAY ) . In that article , the recommendation was for a small, covered call trade in the stock. That trade recently expired in the money for my portfolio, and I left some money on the table as the stock has rallied strongly since then. Time for a 'rinse, wash and repeat' investment or have the shares gotten too pricey? An analysis follows in the paragraphs below.

Company Overview:

This clinical stage biopharma company is headquartered just outside of San Francisco in Newark, CA. The company is focused on developing and providing therapies to treat liver and other chronic diseases. The stock currently trades just over $18.00 a share and sports an approximate market capitalization of just north of $2 billion.

Recent Developments:

CymaBay's primary product candidate is a compound called seladelpar also known as MBX-8025. This is a selective agonist of peroxisome proliferator activated receptor delta for the treatments of the autoimmune liver disease known as primary biliary cholangitis or PBC.

In early September of this year, CymaBay disclosed results from a Phase 3 study evaluated seladelpar to treat PBC. They showed that ~62% of patients achieved the primary composite endpoint compared to 20% on placebo in treating PBC. The stock moved up nicely on the news.

The company presented further data from that study at the American Association for the Study of Liver Diseases last week, which helped trigger a decent move up in the stock on the week. The FDA expanded its breakthrough therapy designation for seladelpar in the treatment of PBC late in October, it also should be noted.

Analyst Commentary & Balance Sheet:

Since third quarter results hit, seven analyst firms including Piper Sandler and BTIG have reissued or assigned Buy/Outperform ratings on the stock. Price targets proffered range from $21 to $33 a share.

Just over 11% of the outstanding shares in the stock are currently held short. The company ended the third quarter with just under $440 million of cash and marketable securities on its balance sheet. Management has stated this is sufficient to fund all planned operational activities into the first half of 2026. The company raised some $150 million via a secondary offering in September. The capital raise came a few days after the company disclosed those positive Phase 3 trial results to treat PBC it should be noted.

Several insiders have been frequent sellers on the stock on the rally in the stock. They have disposed of approximately $4 million collectively so far in the second half of 2023 to date.

Verdict:

CymaBay has done a good job in advancing its lead candidate to treat PBC, a disease where current treatments often prove inadequate. If all goes well, seladelpar should be approved for a subset of the PBC population and launched in 2025.

The company also has several earlier stage trials ongoing to expand that patient population pool as well.

It should be noted there are potential and current competitors in the PBC space including Genfit S.A. ( GNFT ) , Ipsen ( IPSEY ) , and Intercept Pharmaceuticals ( ICPT ) . The current PBC market is around $700 million, although it is expected to grow to $1.4 billion by 2032.

I still like the potential of CymaBay even as the company is a couple of years away from commercialization and is likely to do another capital raise to support its marketing rollout, most likely in late 2024 or in 2025. As for valuation, it should be noted that the stock has run up some 80% since we last profiled the company and the rise has triggered some significant insider selling in the equity.

Therefore, I am not going to chase the recent rally. However, if the stock drops below $15 a share in an overall market pullback, I will probably once again tee up this name as a small, covered call trade.

Greed believes that fact is a fully refundable accessory ."? Craig D. Lounsbrough

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