COVID drug could be big for Appili Therapeutics, says Leede Jones Gable

Douglas Loe of Leede Jones Gable likes the progress he’s seeing out of Appili Therapeutics (Appili Therapeutics Stock Quote, Chart, News TSX:APLI), maintaining his “Speculative Buy” rating and target price of $2.75/share for a potential return of 187 per cent in an update to clients on Monday.

Founded in 2015 and headquartered in Halifax, Appili Therapeutics is a biopharmaceutical company focused on the acquisition and development of novel medicines for unmet needs in infectious diseases in Canada. The firm is presently assessing the FUJIFILM Toyama Chemical’s drug favipiravir for the treatment of COVID-19 in a Phase II trial.

Loe’s latest update comes after Appili announced that it had received an additional US$1 million (C$1.28 million) in funding from FUJIFILM Toyama Chemical, a partner in a global consortium focused on the worldwide development, commercialization and distribution of favipiravir tablets for the potential treatment and prevention of COVID-19, to be marketed under the name Avigan/Reeqonus.

“A cash infusion of this magnitude does not materially impact Appili’s financial risk, specifically on favipiravir but also on its broader antimicrobial drug development pipeline,” Loe said. “It does also send us an encouraging signal on Fujifilm’s sustainably positive regard for favipiravir’s potential in treating viral respiratory infection, and COVID-19 specifically.”

Loe notes that favipiravir is one of two oral antiviral formulations on Health Canada’s Interim Order list, which could potentially expedite review time once pivotal trial data are made available

“FFTC recognizes the unmet need of this pandemic, which is the lack of safe, effective oral antiviral medicines to treat mild-to-moderate COVID-19 patients. With FFTC’s support, we are one step closer to determining if Avigan/Reeqonus will meet this need,” said Dr. Armand Balboni, Chief Executive Officer, Appili Therapeutics in the company’s September 20 release.

Since the announcement of the initial funding, Appili also announced it has completed enrollment in its global Phase 3 PRESECO trial to evaluate favipiravir’s effectiveness as a potential COVID-19 treatment, just ten months after its initial trials began in November 2020.

“As we have seen over the past 18 months, this virus continues to mutate, enhancing its ability to infect and cause significant symptoms, especially in those who have not been vaccinated. My hope is that Avigan/Reeqonus will emerge as a standard of care treatment for mild to moderate COVID-19 patients, resolve patient’s symptoms more rapidly and limit progression to more severe disease,” said Yoav Golan, M.D., Chief Medical Officer, Appili Therapeutics in the company’s September 23 release.

Appili is one of many companies specializing in oral antiviral drug development, which is becoming a target of major pharmaceutical organizations including COVID-19 vaccine producer Pfizer, who are also working on the protease inhibitor PF07321332 alongside low dose ritonavir in a 1,140-patient Phase II/III trial, while Merck is pairing with Ridgeback Biotherapeutics on its molnupiravir oral antiviral therapy in a 1,332-patient Phase III trial, and Roche is partnering with Atea Pharmaceuticals on the oral antiviral agent AT-527, which is now being looked at as a potential COVID-19 treatment after initially being considered as a treatment for chronic HCV infection.

The company’s progress with falipiravir has Loe projecting $89 million in revenue for the company for 2022, then falling off to a projected $20.5 million in 2025 before rebounding to a projected $89 million by 2030, fuelled primary by revenue from its ATI-2307 anti-fungal trial from 2026 onward, with the trials set to begin in 2022.

Loe projects the company’s EBITDA to follow a similar path, forecasting a margin of 93 per cent and EBITDA of $82.5 million in 2022 before dropping to $13.3 million and a 65 per cent margin in 2025, then rebounding to a potential EBITDA of $81.6 million with a 91 per cent margin in 2030.

Loe expects the company to produce a positive EPS for the first time in 2022 at a basic EPS of $1.31/share before dropping to a projected $0.51/share in 2023, while he projects the basic P/E ratio to register at 1x in 2022, then trending upward to a projected 6.4x in 2025 before settling back down to a projected 1.0x by 2029.

With multiple trials ongoing, Loe remains firmly behind the company’s COVID-19 clinical efforts.

“Our attention remains focused on PRESECO and on timelines to data that we believe could show clinical benefit in early-stage COVID-19 infection, the disease stage at which virologic response can be relevant to mitigating acute organ damage that systemic infection can cause,” Loe said. “We believe there remains an unmet need for oral therapies outside the hospital setting and thus favipiravir’s already-documented clinical history bears positively on its prospects in PRESECO and other Phase II/III trials under contemplation.”

Overall, Appili’s stock price is down 18.1 per cent for the year to date, reaching a high point of $1.37/share on February 10.