Cortexyme (NASDAQ: CRTX) a biotech company based in San Francisco, who researches Alzheimer's, Parkinson's disease and periodontal disease. The company was founded in 2012, and in May 2019 went public on the Nasdaq.
Where does the money come from
Cortexyme develops medical products and prepares them for sale in the US market. The main forces of the company are concentrated on the study of specific bacteria, That, in addition to diseases of the oral cavity, may also be a culprit in neurodegenerative diseases.
Portfolio of drugs under development
Cortexyme has several developments:
- COR388, or atuzaginstat, - treatment of Alzheimer's disease, Parkinson's and periodontal disease.
- COR588 - treatment of periodontal disease and diseases, caused by the bacteria Porphyromonas gingivalis.
- COR803/817 - Treatment of COVID-19.
- COR788 / COR822 - purpose not disclosed.
Information about other studies has not yet been disclosed..
Arguments for
A promising theory. The company is actively investigating the theory that, that Alzheimer's is caused by a specific bacterium in the mouth, Porphyromonas gingivalis, which usually causes gum disease. If the theory is confirmed, then Cortexyme will be the first and only of its kind, which will open up the broadest opportunities for its commercial implementation. Recent results of COR388 research caused a wave of negativity among investors, but, according to the company itself, the drug is still too early to write off.
Rating is back to normal. The ratio of the company's capitalization to equity capital has decreased by more than three times in three years. Right now the P/BV multiple is just below 3, which is still not very attractive for value investing advocates, but already corresponds to the average value within the biotech sector.
Business financially stable. Compared to many companies in the biotech sector, Cortexyme's financial position looks advantageous: short-term and long-term assets exceed liabilities dozens of times, debt is zero, and cash flows are stable and cover the needs of the company for more than a year ahead.
Arguments against
Stocks swooped down. After the publication of inconclusive results from another round of COR388 clinical trials, Cortexyme shares have lost heavily in price and are trading below the offering price.. Flagship drug was ineffective, because of which a wave of negativity rose among investors and a sale of shares began, which in one day brought down quotes on 75%.
Doesn't stay close to drug approval. COR388 for the treatment of Alzheimer's was the company's trump card and profit opportunity. But after unsuccessful trials, the likelihood of its approval by the FDA is low.. Given that, that other drugs are, at best, in the second of three mandatory phases of clinical trials, the prospect of receiving sales revenue is getting further and further away.
Competitors do not sleep. While Cortexyme recuperates and makes plans for development, other companies with similar developments can seize the moment and be the first to meet the needs of target patients. For instance, Cassava Sciences shares soar as Cortexyme falls, who successfully started the third phase of clinical trials of the drug for Alzheimer's disease. Interesting, that the rapid growth of the shares of this company was replaced by the same active fall a few days later due to the SEC investigation, who suspected the business of manipulating the results of medical research.
What's the bottom line?
Cortexyme is a good example, how the attractiveness of rapid and significant growth in the biotech sector is balanced by the possibility of rapid decline and big losses. Worth not meeting the high expectations of investors once, and the violent reaction of the latter will not take long. Now the company does not have the best news background, but her financial health is fine and probably, that it will allow businesses to survive temporary difficulties and emerge victorious from them.
