Liminal Biosciences’ price target cut at Leede Jones Gable

Douglas Loe of Leede Jones Gable is not loving what he’s seeing from Liminal Biosciences (Liminal Biosciences Stock Quote, Charts, News, Analysts, Financials NASDAQ:LMNL), maintaining a “Hold” rating and dropping his target price from $2.50/share to $2/share (all figures in this article are in US dollars) with any return listed as not available in an update to clients on Monday.

Based in Laval, Que. and originally known as Prometic Life Sciences, Liminal Biosciences is a clinical-stage biopharmaceutical company focused on developing novel small molecule drug therapeutics for inflammatory, fibrotic, and metabolic diseases in Canada and the United Kingdom.

The company’s lead product candidate is fezagepras (PBI-4050), which has been completed Phase I clinical trial for the treatment of idiopathic pulmonary, liver, cardiac, or skin fibrosis. The company is also in the preclinical stage with its development of antagonist candidate programs.

Loe’s latest analysis comes after the company released its fourth quarter results, along with year-end figures for the 2021 fiscal year.

“Financial data represented the first full quarter during which the firm’s continuing operations were devoid of impact from divested plasma products operations,” Loe said. “The economics of that divestiture is still flowing through the cash flow statement and alongside the sale of the Ryplazim priority review voucher in FQ321, both elements had a seismic impact on both the balance sheet and cash flow generation in full-year financial data.”

As of December 31, Liminal Biosciences had $108.5 million in cash available, with net cash of approximately $70.2 million after paying down its legacy debt obligations to Structure Alpha LP in the first quarter of 2022, putting the company in a debt-free position as it works to fund PBI-4050 development activities in urea cycle disorders during 2022 and 2023.

In Loe’s view, the net cash is sufficient for the company to run Phase I testing for PBI-4050, which Loe has set as a milestone for the second quarter of 2022, as well as Phase II testing, should the trials progress to that stage.

Having just completed a separate Phase I trial for PBI-4050, the second trial’s purpose is to make a direct comparison to Buphenyl, which has had FDA approval since 1996. With the data available for public consumption, Loe does not anticipate any logistical challenges to expediting enrollment into the new Phase I trial being proposed, with an expectation for safety data to be released early in 2023, if not sooner.

Looking ahead to 2023, Loe points to two more candidate programs, a lead identification for its GPR84 offering and a lead for its OXER1 program, as potential catalysts for the company.

“Today, Liminal BioSciences is a streamlined and debt-free Company, we believe that our pipeline is positioned to deliver multiple anticipated value inflection points throughout 2022 with unencumbered intellectual property and a data-driven clinical development plan,” said Bruce Pritchard, Chief Executive Officer of Liminal BioSciences in the company’s March 17 press release. “We believe we have a solid foundation for growth and our full attention is on delivering on our upcoming clinical trial for our lead candidate fezagepras, as well as progressing toward the selection of our lead GPR84 antagonist and OXER1 antagonist preclinical product candidates.”

Given its status as a clinical-stage company, Loe does not project any revenue for the company in any of its categories through at least 2024, though he does project EBITDA losses of $19.8 million in 2022, $16.9 million in 2023, and $14.3 million in 2024.

In the same period, Loe projects the company’s adjusted net income to report losses of $9.9 million in 2022, $6.9 million in 2023, and $4.4 million in 2024.

Meanwhile, Loe also forecasts negative basic EPS for the company, with loss projections of $0.33/share in 2022, $0.23/share in 2023, and $0.15/share in 2024.

Despite maintaining the “Hold” rating, Loe believes the company’s enterprise value is unjustifiably low ahead of possible market adjustments, with the price target change driven by the company’s pro forma net cash.

“We remain ambivalent on LMNL valuation, with shifting development priorities for lead phenylacetate derivative drug PBI-4050 shifting yet again into a new orphan indication (urea cycle disorders, a market currently dominated by phenylacetate derivative drugs, of which PBI-4050 is also one) for which we have limited published data on which to base a view on medical prospects,” Loe said.

Liminal Biosciences has been a loss on the NASDAQ in the last 12 months to the tune of 79.4 per cent, punctuated by a 17 per cent loss since the start of 2022 alone. After hitting a 52-week high of $5.17/share on June 7, the stock has been in a freefall ever since, dropping to a 52-week low of $0.82/share on March 14.