Echelon Wealth Partners analyst Douglas Loe is holding steady on his investment thesis for clinical stage drug developer Antibe Therapeutics (Antibe Therapeutics Stock Quote, Chart, News TSXV:ATE), maintaining in a client update on Wednesday his “Speculative Buy” recommendation and $1.40 target price for the stock.
Antibe is currently starting a Phase II clinical trial for its lead hydrogen sulfide-releasing naproxen analog ATB-346, with a focus on knee osteoarthritis as initial pain management, while the company also has ketoprofen-based drug ATB-352 and aspirin-based ATB-340 in preclinical testing.
On Tuesday, the Toronto-based company filed its financial and operating results for its fiscal first quarter 2020, ended June 30, 2019, featuring top line performance from the company’s regenerative medicine division, Citagenix, with revenue of $2.76 million and gross margin of $1.04 million, which compared to Q1 of 2019’s $2.54 million and $0.98 million, respectively.
Loe says the company remains on a trajectory toward break-even EBITDA for Citgenix by the second half of fiscal 2020 or first half of fiscal 2021 and the analyst pointed to Citagenix’s net loss for the Q1 of negative $0.4 million, which was a hair better than last year’s negative $0.43 million.
“We believe that once Citagenix can demonstrate sustainable profitability, it could be divested to private equity investors or strategic regenerative medicine/orthopedic partners on reasonable terms, perhaps in the 0.8x-to-1.0x T12M revenue range,” writes Loe.
Antibe made a pair of concurrent announcements, one on the closing of an equity offering and the other on a timeline revision for ATB-346. On the latter issue, management has said that where previous guidance for enrolment of the last patient had been for late in calendar Q3 of 2019, that date has been pushed back to calendar Q4, owing, the company says, to “the result of the rigorous screening discipline and a temporary slowdown in patient recruitment due to the summer holiday period,” with the company adding that it has adequate funding to complete the trial while funding its other programs.
Loe says that while he would rather that management had been more conservative on its previous timeline, the change is reasonable and has no bearing on ATB-346’s potential.
On the equity offering, which involves $8.05 million in new capital, Loe says that after crunching the numbers, the effect on his valuation and price target is downward but minimally enough to not call for a revision.
Overall, the analyst writes that he remains positive not just on ATB-346’s prospect in knee osteoarthritis but also on the overall hydrogen sulfide-releasing chemistry platform that he thinks could correspondingly modify other pain therapies.
“We can clearly see a seminal clinical inflection point on the horizon, if a bit more distant than we previously assumed now that projected timelines to Phase II data are shifted into FQ320. But that shift having no bearing on ATB-346’s underlying pharmacology in our view, nor on its medical potential for demonstrating naproxen-like pain relief without naproxen-like side effects and not just knee osteoarthritis pain even though that indication is the focus of initial clinical activities,” writes Loe.
The analyst’s $1.40 target price represents a one-year projected return on investment of 312 per cent at the time of publication.