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Here's Why Axovant Gene Therapies Rocketed Higher Today

Maxx Chatsko, The Motley Fool

What happened

Shares of Axovant Gene Therapies (NASDAQ: AXGT) rose as much as 65.5% today after the company provided updates for two of its gene therapies. Interim results from a phase 2 trial evaluating the lead drug candidate, AXO-Lenti-PD, as a potential treatment for Parkinson's disease suggest it could improve motor function in individuals affected by the neurodegenerative disease.  

Axovant Gene Therapies also provided an update on the first individual dosed with AXO-AAV-GM2, a gene therapy being evaluated as a potential treatment for Tay-Sachs disease. Individuals with the rare disease are missing an enzyme that clears certain fats from cells, which results in damage to nerve and brain cells. The company said the patient remained stable at the three-month mark and demonstrated enzyme activity above the level required for a clinically relevant effect.

As of 12:28 p.m. EDT, the stock had settled to a 31% gain.

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Image source: Getty Images.

So what

It's not too surprising that investors are excited about the updates today. Axovant Gene Therapies, formerly Axovant Sciences, had to remake itself and its clinical pipeline after a catastrophic development failure in late 2017. It decided to go all-in on gene therapies in 2018, which was just in time to catch the over-the-top enthusiasm among investors for any and all things promising to treat diseases by toggling an individual's DNA. The field has witnessed two acquisitions in the last month -- Spark Therapeutics was acquired by Roche for $4.8 billion and Nightstar Therapeutics was gobbled up by Biogen for $877 million -- which has lifted shares of many companies associated with gene therapies and gene editing.

Specifically regarding Axovant Gene Therapies, it's important for investors to acknowledge that the two updates provided today included just three patients total. While clinical trials involving gene therapies will likely involve relatively low numbers of individuals, especially for rare diseases such as Tay-Sachs, it's a little difficult to draw conclusions from results in just three patients. That said, investors are just happy to see any signs of life from the pipeline after the big, bold pivot last year.

Now what

Axovant Gene Therapies hasn't garnered much respect from Wall Street since late 2017. That's why it boasts a market cap of just $300 million -- and that's with the 31% rise I mentioned. Therefore, even relatively minor news can have a big effect on the share price, especially with all the action in the gene therapy space lately. Of course, the investment case will be made or broken by the performance of the pipeline in more robust studies, and the company simply isn't there yet.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Biogen. The Motley Fool has a disclosure policy.