Prospects look even better for Appili, says iA Capital Markets

iA Capital Markets analyst Chelsea Stellick has slightly increased optimism about Appili Therapeutics (Appili Therapeutics Stock Quote, Chart, News TSX:APLI), maintaining her “Speculative Buy” rating while raising her target price to $2.50/share from $2.25/share for a potential return of 143 per cent in an update to clients on Monday.

Founded in 2015 and headquartered in Halifax, Appili Therapeutics is a biopharmaceutical company with a pipeline of infectious disease programs, with the ATI-2307 (antifungal), ATI-1701 (biodefence), ATI-1503 (antibiotic), ATI-1501 (anti-infective) and favipiravir (antiviral) programs all focused on various unmet medical needs.

Stellick’s latest analysis targets the COVID antivrial category, particularly after the release of data concerning molnupiravir, an oral antiviral developed by Merck and Ridgeback Biotherapeutics, a competitor to Appili’s favirapir oral antiviral which is sold under the brand name Avigan.

Stellick notes that Merck’s MOVe-OUT registration trial was halted due to overwhelming success, having shown a 50 per cent decrease in hospitalization and death in a group of 775 patients compared to its placebo arm, which had eight deaths. Consistent efficacy was found across all COVID-19 variants, and the safety profile is excellent, with fewer adverse events in the treatment arm than the placebo arm, and Merck expects to produce 10 million courses of treatment by year-end pending marketing approval, with the United States having already ordered 1.7 million treatments at US$1.2 billion.

But the overall impact for Appili’s prospects is a little better after Merck’s news, according to Stellick.

“Although molnupiravir will likely beat Avigan to market, we believe that, in contrast to the market reaction, the immediate net impact of molnupiravir’s success is slightly positive because the higher likelihood of success in PRESECO is only partially offset by the more crowded market,” Stellick said. “Both molnupiravir and favipiravir target RNA replication, making it likely that similar results will be obtained from similar trials assuming bioactivity at the corresponding dose levels are comparable.”

Originally deployed as a drug to fight influenza, Appili currently has two ongoing trials for its favirapir offering: the Prevent Severe COVID-19 (PRESECO) trial, which is evaluating the drug for the treatment of adults with mild to moderate symptoms of COVID-19, with the study’s primary outcome being to establish a time to sustained clinical recovery, and the Post Exposure Prophylaxis for COVID-19 (PEPCO) trial,  a double-blinded, placebo-controlled, randomized, Phase 3 clinical trial evaluating the safety and efficacy of Avigan tablets in preventing the development of COVID-19 in asymptomatic patients who have had direct exposure to an infected individual within the last 72 hours.

Both the PEPCO and PRESECO trial data are part of the previously announced consortium with Dr. Reddy’s Laboratories Ltd. and Global Response Aid (GRA) to coordinate and accelerate the development, commercialization, and distribution of favipiravir for the treatment and prevention of COVID-19 globally.

Most recently, Appili entered into a strategic alliance with AiPharma, a biopharmaceutical company focused on discovering, developing, and commercializing oral therapies for life-threatening viral diseases, to further the global development of favipiravir for the treatment of COVID-19 and other infectious disease programs.

“COVID-19 continues to be an immense health threat with little relief in sight. The world needs safe and effective oral antivirals that can help alleviate the threat of COVID-19, and I believe Avigan/Reeqonus has the potential to change the trajectory of this pandemic,” said Armand Balboni, M.D., Ph.D., Chief Executive Officer of Appili Therapeutics in the company’s September 29 press release. “This partnership will help us further streamline activities and move quickly following the PRESECO readout to key clinical, regulatory and commercial milestones.”

In addition to favipiravir and molnupiravir, Stellick said Appili has other oral antivirals looking to take a cut of the same market and are in late stages of clinical trials, including the AT-527 antiviral being developed by Roche and Atea Pharmaceuticals and evaluated through its MORNINGSKY trial of 1,386 patients, Pfizer’s Phase 2/3 trial of its  PF-07321332 in combination with low doses of ritonavir (Norvir) in a randomized, double-blind, placebo-controlled study enrolling up to 2,660 healthy adults, and the Gilead Sciences offering remdesivir, which has been approved for temporary use in COVID-19 treatment in approximately 50 countries worldwide. 

With a gradual increase in patients within the target population of both trials, Stellick projects a sharp increase in revenue in 2023 with a jump to $210 million in the PRESECO trial population from $26 million in 2022, with an additional $13 million in revenue coming from the PEPCO trial target population. From there, Stellick projects steeper growth in the PEPCO trial revenue ($71 million by 2030), though the PRESECO trial population retains the bigger share of revenue at $250 million by 2030.

Overall, Stellick believes Appili will be in better shape by simply reaching the market with Avigan than to immediately become the leader.

“Avigan can become competitive as an antiviral treatment and generate meaningful revenue for Appili, but the company faces a higher barrier to entry with respect to providing sufficiently high-quality efficacy data from ongoing trials necessary to obtain regulatory approval,” Stellick said.

Overall, Appili’s stock price is down 19.8 per cent for the year to date, reaching a high point of $1.37/share on February 10.