Byron’s Loe raises target price on Tekmira to $7.50

Byron analyst Douglas Loe points that while Ebola hemorrhagic fever is exceedingly rare, the real demand comes from the US government, which is concerned with bioterrorism-deployed Ebola.On Tuesday, Tekmira (TSX:TKM) announced that the temporary stop-work order announced on August 6th, with respect to its TKM-Ebola program, was lifted by the U.S. Department of Defense.

Tekmira CEO Mark Murray said:”We are pleased that our productive collaboration with the U.S. DoD’s transformational medical technologies program will continue. As we recommence our work, we expect to build on the progress already made with TKM-Ebola and our LNP technology platform.”

Byron Capital analyst Douglas Loe says the decision to lift the stop work order provides him with supporting evidence for Tekmira’s prospects. He points out that peer Sarepta Therapeutics (NASDAQ:SRPT )was also subjected to a stop-work order for its RNA-based Ebola drug, but announced its U.S. government contract had been terminated. Loe says he is now reincorporating projected revenue from the ebola contract into his financial model before the work stoppage was in place, and raising his target on the stock to $7.50 from his previous target of $5.25. Loe maintains a Speculative BUY rating on the stock.

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Burnaby based Tekmira, which was founded in 2005, is one of a handful of companies in the world developing therapies based on RNA interference, and the company is clearly an early leader in the space. RNA interference is a process that cells use to silence the activity of specific genes. The process works by blocking the molecular messengers of a a cell, rendering the cell useless. RNAi has already shown great potential with viruses such as HIV and Hepatitis C. Tekmira has three internal RNA interference product candidates; one to treat hypercholesterolemia, or elevated cholesterol, one for Ebola, and an anti-tumour drug in the treatment of cancer.

Loe says modeling revenue for TKM-Ebola is different than other medical therapies because of the demand side of the equation. He points that while Ebola hemorrhagic fever is exceedingly rare, the real demand comes from the US government, which is concerned with bioterrorism-deployed Ebola. Loe says the quantities of medical therapies the government might want are not disclosed, could be as high as US$200 million, which could mean (US) $30 million-$35 million per year until 2021.

Shares of Tekmira closed today down 2.2% to $3.50.

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