Biotech stocks have always been among the more volatile companies out there on the markets. However, the healthcare sector has been more volatile than ever, following the FDA’s approval of the world’s first Alzheimer’s drug. Since then, other biotech companies working on alternative Alzheimer’s, Parkinson’s, and other neurodegenerative disease treatments have skyrocketed in value, regardless if that’s justified or not right now. That includes the biotech IPO Alzamend Neuro (NASDAQ: ALZN), whose stock skyrocketed as much as 480% on its first day of trading.
The company originally planned to open at around a $5 stock price. When shares started trading on Tuesday, they were going for closer to $29 per share, or around a 480% increase. Prices quickly settled down to $13.5 per share, but early investors already managed to make incredible gains on their initial trades by riding this wave of speculative interest.
The reason why Alzamend Neuro is up so much is due to its pipeline of neurodegenerative disease treatments. Founded in 2016, Alzamend’s main candidate is a drug called AL001, a type of ionic cocrystal of lithium that is used to treat Alzheimer’s disease. This type of treatment has become a lot more popular among biotech researchers in recent years, although they still remain quite experimental in nature.
Following Biogen’s (NYSE: BIIB) approval of its own Alzheimer’s drug, aducanumab, investors are now more excited than ever about other potential treatments in this area as well. Previously considered to be untreatable by the pharmaceutical industry, the unexpected FDA approval for aducanumab has made traders eager to try and find similar stocks to trade. That’s the main reason why Alzamend Neuro skyrocketed as much as it did on Tuesday.
Alzamend plans to apply for FDA approval relatively soon, having started preparing for an Investigational New Drug application which it plans to submit sometime in June. At the moment, AL001 is only in preclinical testing, although current results have been promising. Third-party results will be published next month, with the drug likely to move on to phase ½, and eventually, phase 3 trials relatively in due time.
Like most preclinical stage biotech stocks, Alzamend has virtually no revenues whatsoever. Instead, the company relies on its cash reserves to keep it afloat as it develops its treatments. Once a company starts running phase 3 trials, that’s when expenses really begin to skyrocket and is also usually when clinical-stage biotech’s look for additional funding. However, most clinical-stage candidates end up failing before they reach their phase 3 trials. For that reason, companies tend not to see much in the way of stock price movement until at least a positive phase 3 trial result.
In this case, so many traders are looking for another Alzheimer’s stock to trade that they just bought up Alzamend, regardless of its chances for success. If you missed this particular IPO, it’s unlikely that shares will surge again until future clinical results are released. Until then, your next best bet is to wait for another similar biotech IPO with an Alzheimer’s or Parkinson’s treatment and buy it before the rest of the market does.
