ChemoCentryx (CCXI) Crashes 55% on Mixed AdComm Results, Gets Downgraded at Five Firms

Shares of ChemoCentryx (NASDAQ: CCXI) crashed 55% in pre-open Friday after the Food and Drug Administration (FDA) raised concerns over the approval application of the product avacopan.

“We are grateful to the Committee for their careful deliberations and look forward to working with the FDA as its review of our application continues,” said Thomas J. Schall, Ph.D., President and Chief Executive Officer of ChemoCentryx. “Discussion from patients and clinicians during the public forum portion of the meeting underscored the need for new treatment options.”

The FDA is primarily concerned that the therapy could not show superiority against the standard care. This promoted multiple analysts to downgrade the stock and lower price targets.

Starting with SVB Leerink, whose analyst Joseph Schwartz downgraded ChemoCentryx from Outperform to Market Perform with a price target of $17.00.

He is joined on the sidelines by JPMorgan analyst Anupam Rama who downgraded to “Underweight” from “Neutral” on CCXI shares. He slashed the price target to $17.00 per share from $57.00 per share. The analyst now sees “a significant risk for a complete response letter (CRL) by the July 7th PDUFA,” the analyst says in a memo.

“While the vote was more 50 / 50-ish, we note that commentary by the panel was skewed to more of a negative tone (with even the need for an additional trial cited multiple times by a number of panelists to better understand / come to a conclusion on the benefit / risk profile of avacopan). Net-net, we felt the AdComm underscored the FDA's key concerns raised in the briefing documents rather than providing clarify / comfort around them. Hence, we see the most likely outcome as a CRL, which potentially leads to significant downside in CCXI shares from current levels.”

Stifel analyst Dae Gon Ha has also moved to the sidelines and aggressively lowered the price target to $26.00 per share from $93.00 following a “lackluster advisory committee support.”

“Our diligence on avacopan in ANCA-associated vasculitis (AAV) had indicated a high unmet need, favorable clinical data, with a potentially broad label in an attractive market. And despite what we viewed as excessively cautious tone in the briefing docs (LINK, LINK), we thought input from the panelists could renew our confidence - and odds of approval - in avacopan and our core thesis in CCXI. With generally split voting results between members, we see a greater risk heading into FDA's decision (July 7). We were wrong, and we are now moving to the sidelines,” the analyst writes in a memo.

Raymond James analyst Steven Seedhouse downgraded to “Outperform” from “Strong Buy” as avacopan approval is now a coin flip, he notes. If approved, Seedhouse sees avacopan as “a blockbuster drug,” which is why the analyst is still hopeful that the drug will be approved.

“Avacopan should be approved and we think certain AdCom panelists were unreasonable and unprepared (e.g., wanted larger safety database, more trials, unrealistic trial designs for this serious and rare disease). But a 10-8 vote favoring avacopan on the key risk/benefit question (with one yes qualifying her answer as meaning yes in context of a confirmatory trial) informs our new coin flip model. With the stock halted at $27.49/share before the panel, stock was pricing in ~26% probability of approval so we think stock should actually trade up in the coming days on the basis of our PoS vs. what market was pricing in,” Seedhouse writes in a research note.

A new price target on the stock is $51.00 per share from $120.00.

Piper Sandler's Edward Tenthoff downgraded shares to Neutral, saying they don't believe there is enough FDA approval.

"Based on the negative FDA briefing documents, we do not believe the AdComm vote will be sufficient to persuade the FDA to approve avacopan for AAV by the July 7th PDUFA date," Tenthoff commented.

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