Is Orphazyme a Winner in the Biotech Industry?
June 21, 2021 4 min read  This story originally appeared on StockNews    Shares of Denmark-based biopharmaceutical company Orphazymes (ORPH) experienced extreme volatility this month due to the actions of retail traders that were triggered by discussions about the stock on social media platforms such as Reddit. After hitting its $4.75 all-time low on June 2, this meme stock soared to hit its $77.77 all-time high on June 10. The stock has gained 28.6% over the past month, but lets find out if it has upside remaining given the FDAs rejection of its Niemann-Pick treatment. Read on. Headquartered in Copenhagen, Denmark, shares of relatively unknown biopharmaceutical company Orphazyme A/S (ORPH) soared to hit their $77.77 all-time high on June 10, 2021, on investors anticipation of FDA approval of the companys lead pipeline candidate arimoclomol for the treatment for Niemann-Pick disease type C (NPC). The rally was primarily a result of retail traders investments that were driven by enthusiasm surrounding the stock on social media platforms such as Reddit. However, the company issued a notice on June 11 that the surge in its stock price was not related to any material change in its clinical development programs or financial condition and further warned its shareholders that they could lose a significant portion of their investments. Indeed, the stock has declined 90.6% since hitting its all-time high, and by 40.8% over the past three months to close Fridays trading session at $7.33. The decline can be attributed to ORPHs announcement on June 18 that it failed to receive U.S. Food and Drug Administrations (FDA) approval for the treatment of NPC. Furthermore, Johnson & Johnsons (JNJ) Zavesca is already approved to treat other lysosomal disorders, which could pose a threat to ORPH. ORPHs poor profitability is evident from its negative values for ROE and ROA. So, we think ORPHs near-term prospects look bleak. Click here to checkout our Healthcare Sector Report for 2021  Here are the factors that we think could influence ORPHs performance in the upcoming months:  FDA Rejection  ORPH announced on June 18 that it has received a Complete Response Letter (CRL) from the FDA following its review of its new drug application for arimoclomol, which is a heat shock protein amplifier intended for the treatment of NPC. The FDA said that it would need additional qualitative and quantitative data. ORARIALS-01 pivotal trial of arimoclomol in amyotrophic lateral sclerosis (ALS) and its phase 2/3 trial evaluating arimoclomol for the treatment of inclusion body myositis (IBM) also did not meet its primary and secondary endpoints. Consequently, the company lowered its guidance for its fiscal 2021. ORPH now anticipates its operating loss to come in between DKK 670 million ($106.85 million) and DKK 700 million ($111.63 million) in its fiscal year 2021. The loss was previously anticipated to be in the range of DKK 100 million ($15.95 million) and DKK 150 million ($23.92 million). Its cash position at year-end 2021 is expected to be roughly DKK 50 million ($7.97 million) compared to DKK 350 million ($55.82 million), which was expected earlier. Ongoing Investigation  Several law firms, including Pomerantz LLP and Bronstein, Gewirtz & Grossman, LLC, have launched investigations against ORPH to identify whether the company and certain of its officers and/or directors are engaged in securities fraud or other unlawful business practices. ORPH completed its IPO in September 2020, and on May 7, 2021, it issued a press release that ORARIALS-01 pivotal trial of arimoclomol in ALS did not meet its primary and secondary endpoints to show benefit in people living with ALS. Lofty Valuation Not in Sync with Financials  In terms of forward EV/S, ORPHs 13.70x is 99.1% higher than the 6.88x industry average. The stocks 20.60x forward P/S is also higher than the 7.71x industry average. However, ORPHs operating loss increased 81.1% year-over-year to DKK 608.53 million ($97.05 million) for the fiscal year ended December 31, 2020. Its net loss for the year increased 87.6% year-over-year to DKK 633.25 million ($100.99 million). Consensus Price Target Indicates Downside  ORPH is currently trading at $7.33 and Wall Street analysts expect the stock to hit $5 in the near term, which indicates a potential 31.8% decline. Bottom Line  ORPHs stock is currently trading 90.6% below its all-time high and it is expected to decline further given the U.S. FDAs rejection of its lead candidate arimoclomol. Analysts expect its EPS to remain negative in fiscal 2021 and 2022. So, we think the stock is best avoided now. Click here to checkout our Healthcare Sector Report for 2021  ORPH shares fell $7.33 (-100.00%) in premarket trading Monday. Year-to-date, ORPH has declined -31.69%, versus a 11.34% rise in the benchmark S&P 500 index during the same period. About the Author: Manisha Chatterjee  Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More... The postappeared first on