Arch Biopartners is heading to $6, says iA Capital

iA Capital Markets analyst Chelsea Stellick is staying bullish on Canadian biotech company Arch Biopartners (Arch Biopartners Stock Quote, Charts, News, Analysts, Financials TSXV:ARCH), saying in a Tuesday report that the company is ready to ramp up its clinical development programs.

Arch Biopartners is a clinical-stage developer of drug candidates focusing on inhibiting inflammation of the lungs, liver and kidneys via the dipeptidase-1 (DPEP-1) pathway. The company reported its fourth quarter 2022 results on Monday, featuring a cash burn of $46K for the quarter and a cash balance of $0.5 million. The company is currently in between clinical trials and so the loss from operations was $0.5 million, relatively unchanged sequentially.

Stellick said Arch is preparing for the production of the LSALT Peptide (or Metablok) so as to start Phase 2/3 trials and future drug approval and commercial scale production.

“ARCH’s most recent LSALT Peptide drug substance lot will be used in March 2023 for producing product to be used for the key Phase II clinical trial in cardiac surgery associated acute kidney injury (AKI), a blockbuster unmet market opportunity with >1 million affected people in the US and without any competitive therapeutics,” Stellick wrote.

Last year, Arch’s share price dropped 18.6 per cent, while so far in 2023 the stock is down about two per cent. Stellick sees upside from here, though, and reiterated a “Speculative Buy” rating on the stock as well as a 12-month target price of $6.00 per share, which represented at press time a projected return of 118.2 per cent.

Stellick said due to ARCH’s relative resilience and low volatility over the past 12 months (a drop of 17 per cent compared to the S&P/TSX Capped Health Care benchmark which is down 45 per cent.

“ARCH has been preparing for the manufacturing and eventual scale up of its lead drug candidate Metablok before the initiation of the key Phase 2 clinical trial in cardiac associated AKI. ARCH’s share price exhibits lower volatility than the average pre-revenue biotechnology firm so we believe the Company is well positioned to execute a near-term equity raise for the initiation of this key trial,” she said.

“We maintain our Speculative Buy rating and $6.00/share target price, using an average of a discounted cash flow (DCF), and an EV/EBITDA valuation,” Stellick wrote.