In an ambitious advance in the field of biotech sector, Point72 Asset Management, led by Steve Cohen, tripled its position in Praxis Precision Medicines (US:PRAX), is a clinical-stage biopharmaceutical company specializing in central nervous system disorders.

Point72 has expanded its 1.1 million share stake in the company by an impressive 304% to 8.9% ownership of the float, now controlling approximately 11.43 million shares. This investment decision comes at a time when Praxis Precision has announced a series of major developments, including an extension of its cash runway following a completed capital raise ahead of preparations for Phase 3 trials.

PRAX stock is down 58% in 2023. While exchange-traded fund portfolios generally have allocations of the shares under 0.01%, theme-wise, we’ll compare Praxis stock to Invesco Nasdaq Biotechnology ETF (US:IBBQ), which is only off 3.3% this year.

Longer Cash Runway

On June 22, Praxis announced the closing of a public offering of common stock and pre-funded warrants, a move expected to generate a net of $63.3 million. This substantial financing, complemented by the company’s existing resources, extends its cash runway into the first quarter of 2025.

The newly procured funding is earmarked for the development of ulixacaltamide, a potential drug for essential tremor, into two Phase 3 studies, along with the continued clinical development of other promising therapies in Praxis’s portfolio.

It was likely that Point72 was a major participant in the deal.

Praxis CEO Marcio Souza said, “This financing provides the means to continue advancing our portfolio in movement disorders and in epilepsy closer to patients, with a number of catalysts this year,” according to a company press release.

He went on to appreciate the confidence both existing and new investors have shown in Praxis’s operations.

Backing by Insiders

Three company officers — CEO Souza, CFO Timothy Edwin Kelly and Chairman Dean Mitchell — all purchased more shares themselves back in March of this year.

The purchases equated to 0.25% of the total shares on issue and contributed to a high Insider Sentiment Score of 88.16 on Fintel’s dashboard. The score ranks PRAX in 259th spot or in the top 2% when screened against 14,883 other global securities.

One of Praxis’s anticipated plans is to begin Phase 3 trials for its essential tremor treatment by the year-end, following a positive meeting with the FDA for Phase 2. Praxis is also embarking on a study to validate the mechanism of action of PRAX-628, a prospective epilepsy treatment, with expected results by the end of the year.

With the company’s cash runway now extended to early 2025, and significant steps towards the development and potential commercial launch of its drugs on the horizon, Point72’s increased investment seems well-placed.

Still, challenges remain. Praxis will need to continue to carefully manage its cash runway as it advances its essential tremor and epilepsy efforts, especially given the clinical risk associated with the lack of precedent for using the mADL11 endpoint in essential tremor studies.

Analyst Initiation

Earlier this month, Jefferies analyst Kambiz Yazdi initiated coverage on the stock with a ‘buy’ call and $4 target price. The analyst’s positive view on the stock stems from the believe that Praxis has additional upside in its pipeline, with early stage assets not included in the valuation.

Fintel’s consensus target price of $9.31 suggests most analysts have valuations well above the share price that has lost over 95% of its value in the last five years. Its $1.07 per share close on Tuesday was it’s 12th sub-$1.10 per share close so far this month.

The strategic direction of Praxis remains a crucial question for investors. But with the FDA accepting Praxis’s proposed trial designs and endpoints, and the potential for cost reductions and partnerships to mitigate financial strain, the outlook for the company looks a little more promising. Point72’s increased stake may yet prove to be a well-timed move.

??The FDA endorsed Praxis’s proposal for two Phase 3 studies, one being a 12-week parallel design study and the other a 12-week randomized withdrawal study for stable responders. This strategic path offers the chance to demonstrate ulixacaltamide’s efficacy while reducing risk and costs.

Other Funds Backing Praxis

Fintel’s Net Long/Short Value page for PRAX stock shows us which other managers are holding sizeable positions in the stock. Many familiar names are featured on the list.

This article originally appeared on Fintel

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.