C4 Therapeutics blasts off: what's next?

As the market soars to new heights, with capital fast flowing back into the small-cap, more speculative, and traditionally risky investments and sectors, C4 Therapeutics NASDAQ: CCCC has become the latest small-cap stock to surge higher in price.

With the iShares Russell 2000 ETF NYSE: IWM up more than 5% last week and over 10% on the month, investor's appetite for speculative investments has grown. It’s important to remember that the year-to-date theme has seen small caps, and the IWM trail the rest of the market. 

However, that is no longer the case, as the IWM has notably outperformed the overall market and even the market's strongest year-to-date sector, the technology sector, so far this month.

So amidst the surge of small-cap stocks, where prices are climbing, trading volumes are up, and they're gaining serious attention, it's worth zooming in on the standout small-cap that shot up last week. Let’s figure out if it's a potential investment gem, or another small-cap swept up in the market's excitement and short-lived trading actions.

What is C4 Therapeutics?

C4 Therapeutics, Inc. is a clinical-stage biopharmaceutical company focusing on innovative therapies targeting disease-causing proteins in cancer, neurodegenerative disorders, and other ailments. Their leading candidate, CFT7455, is undergoing Phase 1/2 trials for multiple myeloma and various lymphomas. Additionally, the company is developing treatments like CFT8634 for synovial sarcoma and CFT1946 for melanoma, NSCLC, and other solid tumors. They also collaborate with Roche, Biogen, and Calico Life Sciences.

C4’s stock, appropriately named ‘CCCC,’ has an average daily trading volume of 3.41 million shares. The company has a market capitalization of just over $240 million. As of last week’s close, the stock was trading in the midpoint of its 52-week range and the high-end of its 50-day range. 

Why C4 stock exploded higher last week

C4 Therapeutics witnessed a significant surge in its stock on last Tuesday due to an exciting partnership announcement with Merck NYSE: MRK, a renowned pharmaceutical company. 

This exclusive collaboration focuses on developing degrader-antibody conjugates (DACs), a promising approach to target and combat disease-causing proteins in cancer cells. The deal involves C4 Therapeutics receiving an upfront payment of $10 million from Merck, with potential milestone payments totaling up to $600 million, alongside tiered royalties from future sales. 

Within this partnership, C4 Therapeutics will utilize its Torpedo platform to create degrader payloads during the discovery phase, while Merck will handle the antibody conjugation process to form DACs. Merck will then proceed with clinical trials and commercializing these innovative treatments. 

Andrew Hirsch, President and CEO of C4 Therapeutics, expressed enthusiasm about the collaboration, highlighting the potential to develop groundbreaking medicines that could make a profound difference in patients' lives.

Where’s the stock heading?

With the breaking news came an enormous surge in price for the stock and trading volume. The stock traded over 600 million shares last week, versus its average daily trading volume of just 3.4 million shares. 

While the consensus analyst price target of $9.60, suggesting nearly a 100% upside, might seem exaggerated, it's crucial not to overlook the significance of last week's trading volume. Although it's uncertain whether the collaboration will fundamentally alter the company's trajectory in the long run, the recent surge in trading volume could fuel additional short-term volatility. Consequently, this could position it as a favorable trading vehicle rather than a stable investment vehicle.