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Bellus Health scores big target raise from Research Capital

BELLUS Health

Research Capital analyst André Uddin has revised his view on Bellus Health (Bellus Stock Quote, Chart, News, Analysts, Financials TSX:BLU), maintaining his “Speculative Buy” rating while raising his target price from $4.80/share to $8.90/share in an update to clients on September 13.

Based in Laval, Quebec, Bellus Health is a clinical-stage biopharmaceutical company developing novel therapeutics for the treatment of chronic cough and other hypersensitization-related disorders. The stock has had its ups and downs, notably in mid-2020 after the company announced it had missed a primary endpoint in a Phase 2 trial for BLU-5937, the company’s lead drug, a P2X3 inhibitor for chronic cough.

Uddin’s latest analysis comes after Bellus Health reported interim results from its Phase 2b SOOTHE Trial for BLU-5937.

“The results showed that at least one dose of BLU-5937 met a stringent predefined probability threshold for a clinically meaningful reduction in placebo-adjusted 24-hour cough frequency (the primary endpoint); limited taste-related adverse events were observed, consistent with previous BLU-5937 trials; and no serious adverse events were reported,” Uddin said.

The SOOTHE trial is a randomized, double-blind, placebo-controlled Phase 2b trial with BLU-5937 in refractory chronic cough (RCC) patients, testing different dose strengths of the candidate (12.5 mg, 50 mg and 200 mg BID) against placebo in RCC patients with a baseline cough frequency of ≥25 coughs/hour in 60-person cohorts. The primary endpoint is daily cough frequency, while secondary endpoints include awake and nighttime cough frequency, the Leicester cough questionnaire, and cough severity visual analogue scale.

“We believe the encouraging SOOTHE Phase 2b trial interim analysis will enable us to accelerate the planning for our Phase 3 program while awaiting SOOTHE final results,” said Roberto Bellini, President and CEO of BELLUS Health in the company’s September 13 press release. “With trial enrollment progressing as planned, we anticipate announcing topline data in the fourth quarter of 2021.”

In addition to the SOOTHE trial, Bellus also has a BLUEPRINT trial underway, in which the company is doing a randomized, double-blind, placebo-controlled Phase 2a study to evaluate BLU-5937 in 128 chronic pruritus patients with atopic dermatitis (AD).

Uddin expects the company to report its top-line results from both the SOOTHE and BLUEPRINT trials in the fourth quarter of 2021, while he expects third quarter financial results to come in November.

In terms of financial metrics, Uddin projects the company will begin taking revenue next year, with projections of $4.9 million for both 2022 and 2023 before a major jump to a projected $57.1 million in revenue in 2024 for a potential year-over-year increase of 1,065 per cent. (All figures in US dollars.)

As its primary revenue source shifts from its licensing agreement for FB Health to its licensing agreement for BLU-5937 and royalties, Uddin projects increases to $77.9 million in 2025 (potential year-over-year growth of 36.4 per cent) before a projected dip to $46.7 million in 2026 (year-over-year loss of 40.7 per cent), then rebounding to eclipse nine figures at a projected $105 million for 2027 (potential year-over-year growth of 127 per cent).

Uddin has also modified his projections in relation to the company’s global sales estimates for BLU-5937 for 2025 and beyond, boosting his estimates every year through 2034 beginning with a revised projection of $66.6 million (previously $41.6 million) for 2025, then more than tripling to a projected $209.3 million for 2026 before clearing a projected $500 million in 2027, with a projection to cross the $1 billion sales threshold in 2032 at $1.01 billion.

With 2021 projecting to be the most financially-intensive research and development year at a forecasted $52.6 million, Uddin believes the company’s EBIT will turn positive by 2024 at $35.9 million for a margin of 62.9 per cent after projected losses of $65.4 million in 2021, $27.1 million in 2022, and $15.7 million in 2023. 

Uddin then projects another bump up to $55.9 million (71.8 per cent margin) in 2025 before a projected dip to $23.9 million (51.2 per cent margin) for 2026, then skyrocketing to a projected $81.3 million (77.4 per cent margin) for 2027.

From a valuation perspective, Uddin has the P/Sales multiple coming into effect from 2022 onward, with a projection of 47x for both 2022 and 2023, while his only report on the P/CFPS multiple comes in 2022 at 3.5x.

With the raised target price, Uddin remains optimistic about the company’s trials, even with the risks associated with any clinical study.

“We believe BLU-5937 is potentially a better product than Merck’s gefapixant due to lower taste-related adverse events,” Uddin said. “We are increasing our sales estimates of the candidate in the chronic cough indication across the board.”

Bellus Health shareholders have enjoyed strong performance from the stock, yielding a 98 per cent return for the year to date, and a 55 per cent increase since September 10, closing Friday at $7.72/share to reach a new high point for 2021. At the time of publication, Uddin’s new $8.90 share price represented a projected 12-month return of 127 per cent.

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About The Author /

Geordie Carragher is a staff writer for Cantech Letter

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