Eidos Therapeutics Stock Forecast

Eidos Therapeutics Stock Forecast: Heart disease is the leading cause of death worldwide. In 2017, it accounted for 23.5 percent of the deaths recorded in the United States. That totals more than 610,000 people whose lives were cut short – and there are millions more who are living with various heart-related conditions.

Cardiomyopathy is one of the more common issues facing those with heart disease. This term refers to situations in which the heart muscle is abnormal. Mild cases may not have noticeable symptoms, but as the condition progresses, patients notice a variety of concerns that range from difficulty breathing to swelling in their legs. These symptoms occur because the heart cannot pump blood efficiently throughout the body.

A wide variety of specific conditions fall under the umbrella of cardiomyopathy, and a number of biotech firms are actively pursuing appropriate treatments. Because each form of cardiomyopathy has its own cause – and a unique impact on the heart – the most effective therapies are those that have been developed to address particular diagnoses.

One such company, Eidos Therapeutics, is deep into clinical trials related to a new drug for cardiomyopathy caused by transthyretin (TTR)-mediated amyloidosis (ATTR-CM) – and so far, this therapy appears to be more effective than anything currently on the market.

Some investors have already jumped on board, but others are taking a more cautious approach. Are they wrong? Is now the right time to buy Eidos Therapeutics stock?

What Is Transthyretin Amyloidosis (ATTR)?

Transthyretin amyloidosis (ATTR) cardiomyopathy occurs when a protein called amyloid is deposited into the heart, nerves, and other organs. Transthyretin is the specific sub-type of amyloid protein, and it is normally responsible for carrying thyroid hormone and Vitamin A throughout the body.

In hereditary transthyretin amyloidosis, the protein does not form properly, making it more likely to be deposited where it doesn’t belong. In Wild-type ATTR, the protein is in its correct form, but it is deposited in inappropriate places throughout the body.

Either way, ATTR can affect the walls of the left ventricle of the heart. This chamber has to relax, so it can fill with blood, then squeeze to pump the blood into the body. Amyloid deposits cause the ventricle walls to thicken and become stiff, reducing their ability to pump blood. As the condition deteriorates, the heart begins to fail.

The very specific nature of ATTR requires targeted therapy. Cardiomyopathy treatment isn’t one-size-fits-all. More alarmingly, some common treatments for cardiomyopathy caused by other conditions can actually make ATTR cardiomyopathy worse.

In 2019, the Food and Drug Administration (FDA) approved two first-in-class drugs specifically designed for the treatment of cardiomyopathy caused by ATTR – Pfizer’s Vyndaqel and Vyndamax. In Vyndaqel’s first full quarter in the US market, it generated $79 million in sales.

However, Eidos Therapeutics is ready to challenge Pfizer for market share with a drug that it says is more effective than Vyndaqel at reducing mortality and improving the quality of life in patients with ATTR cardiomyopathy.

For investors, the question is, can relatively small ($2.24 billion market cap) Eidos Therapeutics compete with massive ($212 billion market cap) Pfizer [PFE] in this arena? In short, is Eidos Therapeutics stock a buy?

What Does Eidos Therapeutics Do?

Eidos Therapeutics was founded in 2013, and it is staffed by experienced scientists who have developed more than 30 molecules that have resulted in at least 10 approved drugs. The company’s goal is to find workable solutions for ATTR by starting at the source of the problem: unstable TTR.

The most exciting product candidate for Eidos Therapeutics is its AG10 drug. AG10 is designed to stabilize tetrameric transthyretin, which could prevent amyloidosis from developing. This, in turn, reduces the risk of ATTR-related cardiomyopathy.

The FDA granted AG10 Orphan Drug Designation, which puts Eidos in a stronger position financially. In addition to a variety of financial incentives and credits, Orphan Drugs enjoy market exclusivity for seven years after they earn FDA approval.

The Phase II clinical trial results were presented in November 2019 to a very enthusiastic audience. The drug showed better success rates than Pfizer’s therapy, despite the fact that Eidos enrolled sicker patients in its study.

The next step is a Phase III trial, which Eidos is working on now. If all goes well, enrollment will be complete in the first half of 2020, which means Phase III results will be available in late 2021 or early 2022. If AG10 delivers results consistent with previous trials, the drug could be approved by the end of 2022 or the beginning of 2023.

This timeline could mean a long wait before shares generate substantial value, so Eidos stock isn’t right for those with short-term goals. For investors who are in a position to wait, is now the right time to buy Eidos stock?

Risks of Investing In Eidos Therapeutics

Because Eidos is a smaller biotech with a singular focus on its AG10 drug candidate, it doesn’t have the cushion of income from other approved drugs to pad its revenues. That means financial results may appear discouraging, though in fact they are average or above-average for a company in this industry at this stage of development.

For the third quarter of 2019, Eidos reported net income of $6.9 million, or $0.19 per common share. That represents a year over year gain as compared to third quarter 2018’s net per share loss of ($0.30).

Overall, the company’s expenses have increased because of the costs associated with research and development of AG10, but that isn’t a bad thing. In fact, based on the positive Phase II trial results for AG10, Eidos Therapeutics’ share price has gone up.

Complicated Relationship: Eidos & BridgeBio

Eidos has had some shareholder-related drama in the past year. Approximately two-thirds of Eidos Therapeutics is owned by BridgeBio, a biotech that was founded in 2015. BridgeBio focuses on treatments for diseases that are caused by defects in a single gene, also referred to as Mendelian diseases.

In August 2019, BridgeBio attempted to acquire the remaining shares of Eidos, however Eidos Therapeutics was unwilling to meet BridgeBio’s terms. BridgeBio offered 1.3 shares for every one share of Eidos, and then 1.5 shares, but in the wake of excellent Phase II clinical trial results, Eidos decided that offer was far too low. In October 2019, BridgeBio announced that it would no longer pursue the acquisition of remaining Eidos Therapeutics shares.

Was this a fair deal, or did BridgeBio undervalue Eidos stock? It’s too soon to say. A lot rides on the outcome of the current Phase III clinical trials.

Is Eidos Therapeutics a Buy?

The biggest risk facing Eidos investors – and investors in every other biotech stock – is simple. Even the most promising drugs can fail in late-stage clinical trials.

Many companies have invested millions into therapies that showed impressive Phase I and Phase II trial results, only to find in Phase III that success rates are too low or side effects too high for FDA approval. Such a failure can – and has – devastated stock prices, and investors lose big bucks.

Larger biotechs and biopharmaceutical companies may have the resources necessary to protect investors from total loss, but smaller companies typically aren’t as resilient. Those choosing to invest in Eidos Therapeutics take a big risk – but it could lead to big rewards if the Phase III clinical trial shows the expected results.

The bottom line is that Eidos Therapeutics, and biotech in general, isn’t for everyone – but if you are going into this industry, Eidos Therapeutics stock is a solid choice.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.