Don’t count out Antibe Therapeutics, says Echelon

Canadian biotech company Antibe Therapeutics (Antibe Therapeutics Stock Quote, Charts, News, Analysts, Financials TSX:ATE) hit a bump in the road last year in a clinical trial for its lead pain drug otenaproxesul, but a shift in its target market has put the company back on track, according to Echelon Capital Markets analyst Stefan Quenneville, who provided an update to clients on Antibe on Monday.

Antibe Therapeutics, a drug developer for the acute pain and inflammation markets, has a platform of hydrogen sulfide-releasing (H2S) analogs including otenaproxesul, an analog of commonly-used non-steroidal anti-inflammatory drug (NSAID) naproxen. Otenaproxesul has been found to deliver strong efficacy without the gastrointestinal side effects related to NSAIDs, but in a trial last year for chronic pain focused on the arthritis market, liver toxicity events showed up in an absorption, metabolism and excretion (AME) study. 

Antibe put the study on hold and then shifted its focus from the chronic pain to acute pain market. But the stock dropped significantly last July after news broke of the toxicity events, with no sign yet of a rally. 

But Quenneville sees value in Antibe’s move to acute pain for otenaproxesul.

“While this pivot reduces the drug’s market potential, the US$13-billion acute pain market is a meaningful opportunity given the challenges with current opioid and NSAID treatments. With the stock trading below its cash value of $1.13/share ($59 million), Antibe remains an opportunity for investors with a high-risk tolerance,” Quenneville wrote.

Quenneville reviewed Antibe’s latest quarterly results in his update, where the company announced on Monday interim financials for its third quarter fiscal 2022, ended December 31, 2021. The company reported no revenue for the quarter with an EBITDA spend of $3.8 million and an operating cash burn before working capital of $3.7 million. EPS was negative $0.09 per share. Quenneville had been calling for $4.3 million in negative EBITDA and EPS of negative $0.07 per share.

Operationally, Antibe noted in a presser that its pipeline of drugs is advancing, with preclinical studies underway for specialized pain indication for candidate ATB-352, while it has identified some inflammatory bowel disease candidates with encouraging results now at the animal proof-of-concept stage. 

On otenaproxesul, Antibe said it has the first human pharmacokinetic/pharmacodynamic (“PK/PD”) study underway to determine optimal treatment regimens, it has completed a preliminary third-party commercial assessment on the drug’s market potential and is continuing to investigate alternative treatment regimens.

“We’re excited to have launched otenaproxesul’s clinical program for post-operative pain and remain on track to begin Phase II in the fall. We’re also encouraged by draft guidance published last week by both the FDA and CDC, highlighting the urgent need for new non-opioid pain medications,” said CEO Dan Legault in the press release. 

“With our strong balance sheet, we’ve been able to advance multiple programs in parallel, including our inflammatory bowel disease program which targets a major need in an attractive market. At a corporate level, our disciplined approach to spending provides us with more than two years of cash runway. As the year progresses, we look forward to unlocking value for our shareholders as we achieve milestones across our development programs,” he said.

Looking ahead, Quenneville is expecting Antibe to finish its fiscal 2022 with $2.7 million in revenue, negative $18.7 million in EBITDA and negative $0.47 per share in EPS. For fiscal 2023, he’s calling for zero in revenue, negative $18.0 million in EBITDA and EPS of negative $0.38 per share.

As for otenaproxesul’s timeline, Quenneville noted the PK/PD study and added, “The Company remains on track for its Phase II bunionectomy trial to begin in CQ422 and, given the acute administration period, rapid recruitment process and straightforwardness of this type of trial, expects to have top line results six to 12 months later. Following an end of Phase II meeting with the FDA, a Phase III program could be initiated as soon as CH223 and completed 12-18 months thereafter.”

On Antibe’s two discovery-stage, preclinical assets whose aims are treating inflammatory bowel disease and a specialized pain indication, respectively, also without gastrointestinal side effects, Quenneville said given that those assets are not yet at the clinical stage they have not been ascribed any value in his model.

“We are maintaining our Speculative Buy rating and $3.00/share price target, which is derived using a probability adjusted DCF (11 per cent discount rate, 50 per cent probability of lead program approval), as we continue to view otenaproxesul as a potentially meaningful and differentiated pain drug (NSAID without cardiovascular or GI side effects),” Quenneville wrote.

At the time of publication, Quenneville’s $3.00 target price represented a projected one-year return of 355 per cent.