Veru shares skyrocket by 250% as it hails covid-19 trial success

Veru's (NASDAQ: VERU) share price has shot up by 250% from $4 a share last week to $14 yesterday.

And after striking $15 in pre-market trading, further gains could be imminent.

Veru share price: covid-19 drug success

On Monday, Veru issued a press release full of good news: phase III clinical trials of the company’s new covid-19 treatment sabizabulin demonstrated ‘overwhelming evidence of efficacy,’ with ‘statistically significant and clinically meaningful 55% reduction in deaths compared to placebo in moderate-severe hospitalized patients.’

Phase III trials are notorious as the failure stage for new drugs. But in Veru’s trial, 98 hospitalised patients at risk of developing acute respiratory distress syndrome were given the drug, with an additional 52 patients in the placebo group. All patients received otherwise identical care.

The trial was conducted across the US, Brazil, Colombia, Argentina, Mexico, and Bulgaria to account for any geographical differences. And after 60 days, the placebo group had a 40% mortality rate. In the non-placebo group, this dropped to just 20%.

Moreover, the study found that sabizabulin was ‘well tolerated with a similar safety profile compared to placebo.’ And the drug is taken orally, and only once a day. This will make it cheap to produce and easy to administer.

Veru now plans to meet with the US Food and Drug Administration (FDA) to seek authorisation for emergency use. The FDA previously approved ‘fast track’ designation for the phase III trial, which Veru hopes will ‘streamline’ the process.

CEO Mitchell Steiner hailed sabizabulin as a ‘significant milestone,’ because it’s ‘the first drug to demonstrate a clinically and statistically meaningful reduction in deaths in hospitalized patients with moderate to severe covid-19.’

And encouragingly, Chief Scientific Officer Gary Barnette revealed that ‘the pharmacological activity of sabizabulin is independent of covid-19 variant type.’ This means that it works on all current variants.

Interest from China could be immense, as the logistical limits of the country’s ‘zero-covid’ strategy are being strained by the ineffectiveness of Chinese vaccines against the Omicron variant.

Where next for Veru shares?

Merck's Lagevrio and Pfizer's Paxlovid, developed to protect from mild covid-19, have together attracted government procurement contracts worth $7.5 billion. But Oppenheimer analyst Leland Gershell argues sabizabulin’s ‘ability to improve outcomes in those at high risk of acute respiratory distress syndrome (ARDS) and death distinguishes’ them from these alternatives.

With the Biomedical Advanced Research and Development Authority (BARDA) recently allocated $9.25 billion in additional covid-19 funding, the analyst believes ‘sabizabulin will serve critical roles in the US and abroad.’ Expecting revenue to soar, he’s put an outperform rating on the stock and has a price target of $36.

And the breast and prostate cancer specialist has multiple other drug trials ongoing that could yield further results. This is important when considering its ownership structure. Just over half of Veru shares are owned by the public and a quarter by institutional investors including BlackRock and Vanguard.

And encouragingly, it also has strong insider ownership. According to NASDAQ data, the last time an insider sold shares was last June, despite Veru’s share price peaking at nearly $10 a share in November. This suggests insiders have confidence that the share price will continue to rise.

With this concrete success, institutional investors will likely look to increase their shareholdings. But if insiders choose to retain their stakes rather than take profit, this could put further pressure on Veru’s share price.

As ever, there are risks. After successful phase II trials of sabizabulin in February 2021, the resulting share price surge saw Veru issue an additional 6,451,613 shares, raising $100 million to strengthen its balance sheet. There’s nothing to stop the biotech company from diluting its shares again.

And with volatility high, Veru shares are in price discovery territory. Investors riding a wave of optimism should be careful not to be caught out by ‘FOMO.’

Moreover, successes like sabizabulin, AstraZeneca’s Evusheld or Valneva’s newly approved vaccine are the exception rather than the rule. Synairgen, BridgeBio Pharma, Sensorion, Angion Biomedica, and Rafael are just a few of the names littering the biotech stock graveyard. All experienced steep share price falls after one promising treatment failed to deliver.

And for many Veru investors, the opportunity to take profits now will be tempting.

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