Many clinical-stage biotech stocks have the potential to rise more than 1,000% if they successfully make the transition to the commercial stage with approved and well-received therapies.
But small-cap biotechs are also among the riskiest stocks on the market. For every start-up that succeeds, there will be many similar companies that never turn a profit, and even get treatment approved by the Food and Drug Administration.
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Ayomon (NYSE: EVMN ) Could be one of the winners, and its shares are up 54% so far this year.
This small-cap biotech, which focuses on developing treatments for autoimmune conditions, went public this past November. Its first candidate, the EVO756, is a potential blockbuster. It is currently in a phase 2b trial testing it as a treatment for severe chronic spontaneous urticaria, a long-term autoimmune condition in which inflammation of the skin and deep tissue occurs without an obvious trigger.
Like other chronic spontaneous urticaria treatments, which aim to control histamine or IgE antibodies, EVO756 tries to block MRGPRX2, a kind of “volume knob” in mast cells. It prevents these cells from releasing inflammatory chemicals that cause sweating and swelling.
EVO756 is also undergoing phase 2b clinical trials for the treatment of atopic dermatitis. Best results from the urticaria trial are expected in Q2, while results from the atopic dermatitis trial are expected in Q3 or Q4. Preliminary data showed a clinical response in 93% of patients after only four weeks of treatment.
Analysts at investment bank William Blair estimate that the EVO756 could achieve sales of up to $5 billion across both brands by 2035. Only success in chronic spontaneous urticaria could allow it to reach blockbuster status, while success in atopic dermatitis would indicate the drug’s potential in other inflammatory conditions. Given the recent high-value acquisitions in the MRGPRX2 space — viz IncyteEscient Pharmaceuticals’ $750 million purchase in 2024 – Strong Phase 2 data is expected to make Evommune a prime target for strategic partnership deals or buyout bids.
The company is also developing EVO301, a fusion protein that targets the IL-18 inflammatory pathway and is currently being evaluated in mid-stage trials for atopic dermatitis. After just 12 weeks, the drug produced a 55% reduction in the eczema area and severity index compared to 22% for the placebo, the primary endpoint of the trial.
