Should you buy Verve Therapeutics after a serious setback?

Verve Therapeutics (work -1.84%) The stock plunged 36% on April 2 when it reported a serious incident in one of its clinical trials. Naturally, investors may now be questioning whether gene-editing biotechnology has any chance of recovery, or whether it is doomed. Let’s think a little deeper about what happened while trying our best to be fair about the stock’s movements.

This big red flag can’t be ignored

Verve’s lead program, called VERVE-101, is a gene-editing therapy to permanently cure or potentially cure heterozygous familial hypercholesterolemia (HeFH), an inherited disease that causes dangerously chronically high levels of LDL-C cholesterol. no see. If proven to be safely effective against HeFH in the long term, VERVE-101 could be used to treat the larger population suffering from atherosclerotic cardiovascular disease (ASCVD), which affects tens of millions of people in the United States and beyond.

But as you can guess, things don’t go as planned. In the 13-patient Phase 1b clinical trial of VERVE-101, one patient experienced a serious adverse event (SAE), also known as a potentially life-threatening adverse event, according to a data update from the company. Although the patient did not experience any symptoms, blood tests showed dangerously high levels of certain heart health-related biomarkers. Fortunately, the patient has already recovered.

Management decided to suspend further enrollment in the Phase 1b clinical trial and refocus the company’s efforts on VERVE-102, another candidate that uses a different drug delivery mechanism than VERVE-101 but is otherwise very similar. This is key, because Verve’s leaders seem to believe the problem was caused by the LNP (lipid nanoparticle) system used in VERVE-101, which is not used in other programs.

It is reported that the new LNP used in VERVE-102 has already undergone clinical trials by other companies, and its safety characteristics are better understood. Phase 1b clinical trials of VERVE-102 are scheduled to begin in the UK and Canada in the second quarter of this year.

So it looks like Verve’s lead program has been discontinued. The timeline for potentially commercializing the first drug is now much further away than before, and it is almost certain that some resources have been irretrievably expended with no hope of future returns. The company is in discussions with regulators regarding the future of VERVE-101 and has so far not ordered a halt to the ongoing clinical trial.

It could have been much worse

The above may sound bleak, but the reality of the situation is that Verve’s setback with Verve-101 is a bump in the road, which is known to be quite bumpy.

Biotechnology is just getting started when it comes to therapeutics for editing the genes of living people to treat genetic diseases. Failure of clinical trials is expected. Although it is desirable to avoid safety incidents, confirming safety indicators is precisely the purpose of Phase 1 clinical trials. The fact that the patient was asymptomatic and subsequently recovered greatly alleviates what could otherwise have been a disastrous situation.

Plus, there’s actually some good, if preliminary, news. In one cohort of the study, which consisted of six patients, including one who experienced serious side effects, patients’ LDL-C cholesterol levels decreased by an average of 46%. And in the two patients who received the dose earliest, LDL-C levels remained reduced for at least 270 days. These findings require confirmation but bode well for the efficacy of VERVE-102.

In other words, Verb’s medicine appears to be working for its intended purpose. It also had $624 million in cash, equivalents and short-term securities as of the fourth quarter of 2023. Management is confident that this amount will be maintained through the end of 2026, with research and development costs of $184.9 million for the next 12 months, which is not in doubt at the moment.

These setbacks won’t sink the company. In fact, assuming you can take the risk enough to invest in pre-earnings biotech stocks, this is actually a buying opportunity. Of course, there is a good chance that VERVE-102 will also falter. But if successful, investors who weather the turbulence will likely be handsomely rewarded.