Biotech stock Xenon Pharmaceuticals rocketed Monday, overtaking its 50-day moving average, after its experimental epilepsy drug unexpectedly showed promise in depression treatment.
Patients who took a high dose of Xenon's drug had a 3.04-point improvement compared to the placebo group on a 60-point scale measuring depression symptoms. The results didn't reach statistical significance, but some secondary measures hit that mark.
Wedbush analyst Laura Chico says this is a case of "when a miss isn't a miss."
RBC Capital Markets analyst Brian Abrahams says Wall Street didn't expect Xenon's treatment, known as XEN1101, to show promise in major depressive disorder. This was the company's first foray into depression treatments.
"We also believe the validation of XEN1101 as having mood benefits can further set the drug apart in the epilepsy landscape and further secure a $1B+ potential opportunity, as KOL feedback suggests that mood is a major quality of life impact in epilepsy patients and physicians would lean towards a drug with proven improvements in mood," Abrahams said in a report.
On today's stock market, biotech stock Xenon surged more than 17.8% to 34.12. That pushed Xenon stock above its 50-day moving average for the first time since October, according to MarketSmith.com.
Biotech Stock: Differentiating Its Epilepsy Drug
But Xenon isn't currently planning to test XEN1101 in depression treatment, said Chico, the Wedbush analyst. Instead, the company is focusing on moving ahead in epilepsy treatment.
"We continue to think best-case approach might be to forego an extensive major depressive disorder stand-alone effort and remain focused on epilepsy," she said in a report. The study results "can still be leveraged to further differentiate XEN1101 as an anti-epileptic with potential mood disorder effects."
Chico kept her outperform rating on the biotech stock.
RBC's Abrahams raised his price target on Xenon stock to 56 from 51. He also has an outperform rating on the biotech stock and sees a $1.7 billion opportunity in the long term for XEN1101.
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