FWBI keeps “Buy” rating at Roth

Following news of an acquisition, Roth MKM analyst Jonathan Aschoff remains bullish on First Wave BioPharma (First Wave BioPharma Stock Quote, Chart, News, Analysts, Financials NASDAQ:FWBI).

On December 18, FWBI announced it had signed a non-binding term sheet for a business combination with ImmunogenX, a clinical-stage biotherapeutics company developing Phase 3-ready latiglutenase, a potentially first-in-class, targeted, oral biotherapeutic for celiac disease.

“A business combination with ImmunogenX will be a transformational event for First Wave as it will provide our company with a Phase 3-ready asset, latiglutenase, and scientific, medical, and regulatory experts from ImmunogenX, led by Dr. Jack Syage and by Professor Chaitan Khosla, who completed the seminal work leading to the discovery of latiglutenase at his laboratory at Stanford University,” said FWBI CEO James Sapirstein. “Latiglutenase has the potential to be a first-to-market treatment for celiac disease, a GI-disorder that impacts approximately three million people in the U.S. and for which no approved pharmacologic treatment currently exists. Upon the closing of the business combination and concurrent financing and licensing transaction, we plan to immediately advance the regulatory, manufacturing, and clinical processes that would enable the initiation of the pivotal Phase 3 clinical trials of latiglutenase by the second half of 2024. This trajectory could enable latiglutenase to enter the multibillion-dollar celiac disease market by 2027.”

In a research update to clients January 2, the analyst maintained his “Buy” rating while summarizing the development and the reason for his price target change on the stock.

“FWBI recently signed a non-binding term sheet to acquire ImmunogenX to gain Phase 3-ready latiglutenase for celiac disease. FWBI also recently entered into a non-binding term sheet to sell niclosamide, thus allowing FWBI to focus on its three late-stage gastrointestinal programs: selective 5-HT4 receptor partial agonist capeserod for definite gastroparesis, recombinant lipase enzyme adrulipase for exocrine pancreatic insufficiency, and soon latiglutenase. Due
to FWBI’s impending latiglutenase acquisition, recent 1 for 20 reverse split, and recent warrant exercise transaction, our PT is $40, versus $11 prior.”

Aschoff ran down his valuation and the risk/reward scenario on the stock.

“We derive our 12-month target price of $40 via a DCF analysis, assuming a 20% discount rate that is applied to all cash flows and the terminal value, which is based on a 5x multiple of our projected 2030 operating income of about $178 million. We base our valuation for FWBI on projected future U.S. royalties on adrulipase for the treatment of EPI due to CF and CP, from U.S. royalties on capeserod in gastroparesis, and from U.S. royalties on latiglutenase in celiac disease,” he said. “Factors which could impede the achievement of our target price include, but are not limited to: (1) a request from the FDA for additional and lengthy clinical trials for adrulipase or capeserod; (2) failure of adrulipase or capeserod to gain regulatory approval; (3) smaller than projected commercial opportunity due to changes in market size, competitive landscape, drug pricing, and reimbursement, and (4) financing risk, as FWBI will need additional capital to fund its operations, and such financing may not occur, or it could be substantially dilutive to existing investors.”