Will Antibe Therapeutics break out in 2020?

Investment bankers Paradigm Capital launched coverage on Wednesday of drug developer Antibe Therapeutics (Antibe Therapeutics Stock Quote, Chart, News TSXV:ATE) with a “Speculative Buy” rating, saying that its naproxen analog ATB-346 makes the stock a good investment for both the near and long term.

Toronto-based Antibe is a clinical-stage drug company leveraging its proprietary hydrogen sulfide-releasing drug platform for pain and inflammation therapy. So far, the company has completed a final Phase 2 trial for ATB-346 testing its therapeutic benefit for osteoarthritis patients, with top line results due out soon.

As a modification of naproxen, ATB-346 is said to overcome the gastrointestinal damage produced by other NSAIDs (nonsteroidal anti-inflammatory drugs), giving it an opportunity “to disrupt a multi-billion-dollar market,” according to Paradigm analyst Corey Hammill.

Hammill pointed to the 70 million prescriptions given out each year in the United States for NSAIDs with brands from Advil, Aleve and Motrin having brought in billions in sales in both over-the-counter and prescription revenue, making NSAIDs one of the most commercially successful drug classes.

With ATB-346, the drug has so far completed a small Phase 2 trial which concluded it was more effective in relieving pain than literature reports of naproxen or celecoxib. A larger Phase 2 trial found that ATB-346 caused significantly fewer ulcers than naproxen.

Now, Antibe has recently completed a trial of 360 osteoarthritis patients receiving ATB-346 once daily for changes in pain intensity, physical stiffness and quality of life as well as treatment-related adverse effects. Currently, that data is being analyzed with results expected soon, according to Hammill.

“With top-line clinical trial results on its lead candidate expected in the coming weeks, a pipeline of additional therapies that leverage its H2S platform, and the potential to displace billions of dollars in current pain prescriptions, we see Antibe as a unique investment opportunity,” Hammill wrote.

As for its financials, all of Antibe’s current revenue comes from regenerative medicine company Citagenix, acquired in 2015, and should be sold off by the end of 2020, Hammill predicted, in aid of focusing on ATE’s drug development program. The 2019 revenue for Citagenix was $9.5 million.

Currently, Antibe has $2.3 million in debt, $2.2 million of which is a secured revolving credit facility maturing on June 29, 2020. As of the end of 2019, Antibe reported cash of $6.6 million, while subsequent to that date ATE announced an additional $2.3 million from exercising warrants.

Hammill estimated Antibe will need more cash to see it through Phase 3 trials with ATB-346 for osteoarthritis, saying that the company will likely need to do four Phase 3 trials at an approximate total cost of $35 million.

“Depending on the cash balance the company wants to have while engaging with potential U.S. commercial partners and the timing of these payments, Antibe may need to raise additional equity financing over the next 12 months to support their development,” Hammill wrote.

“Using our current assumptions on the timing and size of the upfront payment, we currently do not include a raise in our numbers; however, this could change depending on market conditions, strategic planning and other circumstances,” he said.

Hammill thinks ATE will generate fiscal 2020 revenue of $10.3 million and an EBITDA loss of $11.1 million, followed by fiscal 2021 revenue of $33.3 million and EBITDA of $16.3 million.

The analyst’s “Speculative Buy” rating comes with a 12-month price target of $2.00, which at the time of publication represented a projected return of 170 per cent.