Since reporting some early-stage clinical data from one of its gene editing programs on Nov. 12, share prices of Verve Therapeutics (VERV -4.44%) are down 42%. But contrary to what you may be assuming based on the drop, no news was reported that regulators were halting its clinical trials or that it was discontinuing any of its programs. And there's no sign that its intentions are to do anything other than continue onward with advancing its pipeline, full-steam ahead.
So is this biotech worth buying, or did the market act appropriately and dump Verve's stock because there's something obviously wrong? Let's dive in.
Even after a steep drop, there's still plenty of risk to go around
Verve's program for heterozygous familial hypercholesterolemia (HeFH), VERVE-101, is currently in its phase 1b clinical trials, and it's also the lead program in its pipeline -- and is in fact its only clinical-stage program. In theory, VERVE-101 is intended to permanently edit patients' genes such that their LDL-C cholesterol levels are reduced, thereby correcting the hereditary defect driving those levels higher. After all's said and done, the goal is for patients to have normal or close-to-normal cardiac risks. If the medicine makes it to the market, likely many years from now, it could treat as many as 3 million people in the U.S. and Europe alone.
Trials in phase 1 are designed to identify safety concerns to provide a measure of confidence that patients in larger future clinical trials will not take on an undue amount of risk relative to the potential benefit of treating their illness by participating. For a chronic illness like HeFH, which tends to cause patients to be at high risk for heart attacks even when they're on cholesterol-controlling medication, safety is an even more important consideration than usual. And that's one big problem for shareholders right now.
On Nov. 12, the biotech announced that two of the 10 patients in the trial experienced heart attacks some time after their dosing with VERVE-101. One patient passed away five weeks after treatment as a result. The other patient had a heart attack one day after dosing. It's absolutely no surprise that the stock would crash after this data went public.
But seriously thinking about buying Verve Therapeutics stock requires probing the issue a bit further. The fatal heart attack is not thought by the investigators running the trial to be connected to the patient being treated with VERVE-101. And presently they are only considering the non-fatal heart attack to be "potentially" related to the experimental treatment.
Apparently, the patient who had the non-fatal attack had not reported some of their cardiac symptoms that started the day before treatment, which makes forming a definitive conclusion about whether VERVE-101 was the cause of their heart attack much more difficult. Furthermore, four of the 10 patients had experienced heart attacks in the time prior to being treated in the study. Nine of them had prior bypass grafting, prior revascularization surgery, or coronary stents installed. And due to those mitigating factors, the biotech will be proceeding with the rest of the trial.
So as far as the bull thesis is concerned, the market is overreacting to the bad news because it doesn't appreciate the full context of the clinical data. That judgment is likely to be at least partially correct. But the company is still a long way from earning a single dollar of sales revenue, and these early bumps in the road might not lighten up. The company's future clinical trial results with this candidate will now be interpreted by the market with particular skepticism toward safety factors from here on out.
It's wise to let this one cook for a bit longer before starting to nibble
In terms of its financial resources, Verve has $485 million in cash, equivalents, and investments, and it's carrying $77 million in debt. Per management, that's sufficient to fund its operations through the start of 2026, which looks about right considering that its trailing 12-month (TTM) operating expenses are $225 million. At that point, it'll need to find more capital. It'll likely issue new stock and take out new debt to do so. It's also likely that its deep-pocketed collaborators Eli Lilly and Vertex Pharmaceuticals will want to chip in hundreds of millions in additional funding if the collaboration programs look promising from their perspective.
So the risk of making an investment right now isn't that the company will run out of money and go out of business in the near term, but rather that the chances of another brutal drop in its share price will remain high over the foreseeable future. It's the same old biotech stock investor's dilemma. Early-stage players like Verve offer the opportunity for the largest gains over time by stacking up positive regulatory milestones and reporting good clinical data, but it's also true that the least-mature pipeline programs have the most opportunities for things to go badly awry.
In Verve's case, the most recent problems with VERVE-101 show that the company's first clinical bid is, for lack of a more graceful phrase, off to a bad start. It's entirely possible that its suboptimal results will not recur, and that future safety data will be far more favorable -- but the reverse is possible too. Even though its efficacy data are shaping up nicely so far, with patients experiencing robust reductions in their LDL-C cholesterol levels, investors should take care to remember that regulators are not going to give VERVE-101 the nod to advance to the next clinical trial stage, nevermind commercialization, if the safety issues are not comprehensively addressed to their satisfaction. That makes this a very high-risk investment, even in the context of other pre-revenue biotechs just starting to enter the clinic with their lead candidates.
Should you buy it? Not yet. Unless you're looking for a speculative bet, wait until there's more good-looking clinical safety data to go on.
