A tiny London, Ont., medical device company hoping to change how diabetes is treated has had a wild ride of late. Last Friday, stock in Sernova Corp.
shot up 65 per cent on the TSX Venture Exchange, then nearly doubled on Monday, closing at $2.42 a share. At its peak, Sernova had a market capitalization of $630-million, making it one of Canada’s 15 most valuable publicly traded life sciences companies.
But then the stock, which is primarily owned by non-IS PRIMARILY OWNED AND TRADED BY NON-INSTITUTIONAL INVESTORS, lost 32 per cent of its value over the next three days. Even so, at Thursday’s $1.64 closing price, Sernova is still well above the range of 10 cents to 30 cents it has traded in for most of the past decade.
The sudden interest in a 10-person company that has toiled in near anonymity for years on the campus of Western University is owing to two factors. Last Friday, Sernova released some promising, albeit limited and preliminary, clinical data.
“It’s nice to see Canadian progress in an area where we’re always quite proud – insulin and diabetes,” said Michael May, chief executive of the Centre for Commercialization of Regenerative Medicine. “But … a lot more clinical trials and experiments will have to be done.”
Sernova stock has also benefited from the successful initial public offering last month of cell therapy developer Sigilon Therapeutics, which works in similar therapeutic areas, followed by Sana Therapeutics, which filed to go public last week – both offerings at much higher valuations than Sernova. Investors “realize our stock is undervalued,” Sernova CEO Philip Toleikis said in an interview.
All three companies are years from getting products to market and face significant hurdles. “This [Sernova] study is the first serve in the tennis match to determine whether we have an approvable device or not,” said Doug Loe, an analyst with Leede Jones Gable, who this week upped his stock price target for Sernova to $2.50 from $1.
But that is also the nature of the biotech business. Stock spikes or plummets accompany key milestones in the costly, lengthy process to prove a product’s safety, effectiveness and worthiness of regulatory approval. Fortunes can be won or lost by investors along the way.
Sernova has spent more than a decade developing an alternative method to deliver insulin for type 1 diabetes patients. The main standard of care since the discovery of insulin by Canadian researchers 100 years ago has been taking blood-sugar readings and injecting insulin daily.
Sernova’s head office, on a road named after insulin co-discoverer James Collip, is seven kilometers from the “birthplace” of insulin: Frederick Banting’s onetime home. Despite insulin’s legacy, production is dominated by three non-Canadian giants: Eli Lilly & Co., Novo Nordisk A/S and Sanofi SA.
Researchers since the 1990s have transplanted donated insulin-producing cell groupings known as islets into diabetics with some success. In 2000, The New England Journal of Medicine reported that seven diabetic patients in a University of Alberta study who received transplanted islets were able to forego insulin injections for a year, although they had to take anti-rejection drugs with side effects. Given the limited number of islet donors, drug companies have turned to developing islets derived from stem cells.