Sernova has a projected 312 per cent return, says Leede Jones Gable

Leede Jones Gable analyst Douglas W. Loe gave an update to clients on Thursday on biotechnology company Sernova (Sernova Stock Quote, Charts, News, Analysts, Financials TSX:SVA), where he maintained a “Speculative Buy” rating on the stock. Loe said he likes the clinical progress being made on the company’s Cell Pouch implantable cell reservoir platform.

London, Ontario-based Sernova is a clinical-stage regenerative cell therapeutics company with lead asset the Cell Pouch System, an implantable device which helps ensure the long-term survival of therapeutics cells to support chronic disease treatment. Sernova currently has the Cell Pouch in early development for type 1/2 diabetes, hemophilia A and hypothyroidism.

Sernova delivered an update on Thursday which included the expansion of enrolment for its Phase 1/2 trial for type 1 diabetes, following promising interim results from the first six patients in the study. 

“We are pleased with the positive interim results demonstrating that the Cell Pouch System is well tolerated, reduces or eliminates the frequency of severe hypoglycemic events and continues to contribute to durable insulin independence among patients,” said president and CEO Philip Toleikis in a press release.

“Based on our now expanded recruitment activities and efforts, we anticipate implanting multiple patients before the end of 2022. The results from these additional patients will directly contribute to our pivotal T1D trial design and help accelerate entry into the clinic with our iPSC stem cell derived islet technology in conjunction with our Evotec partnership that is progressing ahead of our expectations,” he said.

Commenting on the update, Loe said that while Sernova didn’t provide any new interim data from patients in the Phase 1/2 islet transplantation trial, he said he looks forward to seeing how patients are performing on the Cell Pouch. Loe pointed out how this past summer Sernova said there were three patients for which blood glucose homeostasis was achieved without the need for supplemental insulin support, one of which achieved that status for at least two years post-islet implantation.

“We are encouraged by Sernova’s ability to sustainably revisit Cell Pouch design elements so that it can be deployed into a broader array of eligible subjects, specifically diabetic subjects in the just-expanded University of Chicago-supported 14-patient Phase I/II islet transplantation trial,” Loe said.

“We look for another interim update on how legacy Cell Pouch patients are performing in the trial, specifically on duration of blood glucose stabilization without insulin supplementation, but also on pace of patient enrolment in the expanded trial that we expect to accelerate in coming months and for which we expect initial enrolees to be randomized before calendar year-end,” he said.

By the numbers, Loe is forecasting Sernova to have significant revenue in 2027 at $53.6 million and rising steadily from there to $994.7 million by 2032. EBITDA is expected to be positive in 2027 and $31.6 million and rising to $622.3 million by 2032.

With the update and reiterated “Speculative Buy” rating, Loe maintained a target price of $3.30 per share, which at press time represented a projected one-year return of 312 per cent.