Erytech Pharma (NASDAQ: ERYP) stock has jumped 50% this morning premarket on the back of a report in the British Journal of Haematology. This isn’t the end of the process to a full and saleable product, not at all, but it is useful stage along that path. It’s possible to take this as being a worthwhile valuation point for the company.
Erytech is a clinical-stage biopharmaceutical company which is developing interesting ways of getting therapeutic drugs into the human system. The specific approach they’re trying is to put the drug into red blood cells which are then put into the patient. This is one of those bright ideas that may or may not work of course – that’s why this is all development stage.
The point about clinical-stage is that this is not mere clouds in the sky thinking. The point is that there are real drugs, or treatments, available and the necessity of testing them in a real world environment – on actual people that is. The specific treatment causing the excitement today is a Phase II one. Phase I is a small group of people just to check that it doesn’t actually poison anyone. Phase II is to check that it does in fact treat the condition that it is aimed at treating. Phase III is to test on a much larger population and show that the benefits are worth any side effects.
The results of the Phase II trials who that yes, as far as something is declared to work at this stage, it works. Full details are here. Stripped of all the technical wording, there is a treatment for certain leukemias, cancers of the blood. However, some to many become hypersenstive to that treatment itself. At which point the treatment has to stop, but as that is the only treatment available therefore the cancer progresses to its end.
Erytech’s result shows that by putting that asparaginase treatment into red blood cells first then it is possible to continue to treat the leukaemia even in those who have become hypersensitised to the asparaginase itself.
As far as anyone says such things about Phase II trials it could thus be said that the Erytech treatment “works”. This is indeed a valuation moment because the majority of treatments do not in fact work.
Yes, there’s still more research and testing that needs to be done – those Phase III trials. These are often done in association with a much larger pharmaceuticals company given their costs. As is also often usual the company that comes in to carry that burden of the Phase III trials will also sign up to be the distributor on the assumption that it passes that next stage of testing.
The nett effect of all of this is that Erytech is now a candidate to do a deal with one of the big boys in the industry. Future valuations are likely to be friven by the perceived success of such negotiations.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.