Investment Thesis

Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT) is in the news once again. This time, an article alleges OCA, the company’s only commercialized drug, has become the subject of an FDA investigation related to its safety. The stock, once battered by the company’s failed attempt to make OCA the first FDA-approved therapy for NASH, has slumped to trade near a 52-week low last week. The article has made no revelation, and the newly-identified safety signal, under evaluation as part of the FDA’s routine post-marketing surveillance, is classified as only a “potential risk” whose link to the drug is yet to be established.

As Intercept refocuses on OCA in PBC, the reputational damage can further decelerate the sale growth, already under pressure from the pandemic-related slowdown in new patient starts. Though the company leads in NASH therapeutic development, the highly complex path for a regulatory signoff rules out any premium for the current forward price-to-sales multiple, which, even with my optimistic revenue forecasts for 2020, identifies a modest premium for the stock. With the margin of safety being hardly adequate to offset the sales as well as R&D uncertainty, my neutral view on the stock remains.

Intercept Pharmaceuticals_Ocaliva

Source: Emedz.net

Intercept Suffers a Double Whammy

Not even a week had passed since its previous regulatory hurdle when I last penned my article on Intercept in early July. The stock had crashed ~39.7%, posting the sharpest one-day drop following the announcement of the CRL (Complete Response Letter), which relates to the NDA (New Drug Application) the company filed for OCA (obeticholic acid/Ocaliva) for liver fibrosis due to NASH (nonalcoholic steatohepatitis). Despite the neutral rating on the stock, based largely on the uncertainty linked to the clinical development of liver therapies, I remained optimistic about the company’s prospects. After all, the FDA’s decision was based on

Atea Pharmaceuticals, a clinical stage biotech developing therapies for COVID-19 and other viral infections, filed on Friday with the SEC to raise up to $100 million in an initial public offering.

Atea Pharmaceuticals is developing antiviral therapeutics for life-threatening viral infections. The company has built a proprietary purine nucleotide prodrug platform to develop novel product candidates to treat single stranded ribonucleic acid, or ssRNA, viruses, which are a prevalent cause of severe viral diseases. The company’s most advanced candidate, AT-527, is currently in a Phase 2 trial in approximately 190 adult patients with moderate COVID-19, with topline data expected in the 1H21.

The Boston, MA-based company was founded in 2014 and plans to list on the Nasdaq under the symbol AVIR. J.P. Morgan, Morgan Stanley, Evercore ISI and William Blair are the joint bookrunners on the deal. No pricing terms were disclosed.

The article COVID-19 biotech Atea Pharmaceuticals files for a $100 million IPO originally appeared on IPO investment manager Renaissance Capital’s web site renaissancecapital.com.

Investment Disclosure: The information and opinions expressed herein were prepared by Renaissance Capital’s research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital’s Renaissance IPO ETF (symbol: IPO), Renaissance International ETF (symbol: IPOS), or separately managed institutional accounts may have investments in securities of companies mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Quick Take

InMed Pharmaceuticals (INM) intends to raise $10 million from the sale of common stock and warrants in an uplisting / Nasdaq IPO, according to an amended registration statement.

The company is developing cannabis-derived treatments for skin and eye conditions.

INM is still at a preclinical stage of development and is thinly capitalized; the IPO may be more suited to long-term hold institutional investors, so I’ll watch the IPO from the sidelines.

Company & Technology

Vancouver, Canada-based InMed was founded to advance drug programs for epidermolysis bullosa [EB], a skin condition that results in layers of skin not sticking to each other and for glaucoma, an eye condition that damages the optic nerve.

Management is headed by president and Chief Executive Officer Eric Adams, who has been with the firm since 2016 and was previously CEO at EnGene and held senior roles at QLT.

Below is a brief overview video of InMed’s recent announcement for treating EB:

Source: Business Television

The firm’s lead candidate is INM-755, a cannabinoid-based treatment candidate for epidermolysis bullosa.

The drug is current in Phase 1 safety trials and management expects it to advance to Phase 1/2 efficacy trials in 2021.

The company’s second candidate is INM-088, a cannabinoid treatment for glaucoma and management expects it to enter Phase 1 safety trials in 2021.

Below is the current status of the company’s drug development pipeline:

Source: Company S-1 Filing

Investors in the firm have invested at least $70 million.

Market & Competition

According to a 2019 market research report by Technavio, the global market for epidermolysis bullosa is expected to grow by nearly $305 million from 2019 to 2023.

This represents a forecast CAGR (Compound Annual Growth Rate) of almost 5% from 2019 to 2023, as shown in the chart below:

Key elements driving this

InMed Pharmaceuticals, a clinical stage biotech developing cannabinoid-based products, announced terms for its IPO on Thursday.

The Vancouver, Canada-based company plans to raise $10 million by offering 2.4 million shares at $4.13, above the last close of its shares on the OTCQX (IMLFF) and the Toronto Stock Exchange (IN). The company is also offering warrants to purchase 2.4 million shares of common stock at an assumed exercise price of $4.13. At the proposed price, InMed Pharmaceuticals would command a market value of $32 million. Because the company is offering warrants and its market cap is below $50 million, InMed is no longer eligible for tracking and will be excluded from Renaissance Capital’s stats.

InMed Pharmaceuticals is developing an API using a synthetic cannabinoid named cannabinol, or CBN, and plans to develop its two products INM-755 for rare skin disease Epidermolysis Bullosa (EB) and INM-088 for glaucoma. INM-755 is currently in a Phase 1 trial in The Netherlands.

InMed Pharmaceuticals was founded in 2014 and plans to list on the Nasdaq under the symbol INM. Roth Capital is the sole bookrunner on the deal.

The article Canadian nano-cap biotech InMed Pharmaceuticals sets terms for $10 million Nasdaq uplisting originally appeared on IPO investment manager Renaissance Capital’s web site renaissancecapital.com.

Investment Disclosure: The information and opinions expressed herein were prepared by Renaissance Capital’s research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital’s Renaissance IPO ETF (symbol: IPO), Renaissance International ETF (symbol: IPOS), or separately managed institutional accounts may have investments in securities of companies mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source Article

Investment Thesis

Fueled by chronic undervaluation despite the solid financials and a rich pipeline, Alexion Pharmaceuticals, Inc. (ALXN) has frequently been the subject of acquisition rumors as investors demand a sale of the company. Management has revised up the 2020 revenue guidance twice over the past three months, but the shares have underperformed the broader market in the year so far. The top line growth continued unabated even through a raging pandemic, and margins have also held up. The rivals are challenging the prospects, but proactive measures are in place to neutralize the threat.

The current NTM EV/EBITDA multiple stands at a sharp discount to the historical average, which, along with our conservative EBITDA forecast, based on revenue assumptions in line with the past, indicates an undervalued stock. Meanwhile, the strong cash flows and net cash position have attracted acquirers looking for growth at a cheap valuation. Amid acquisition rumors, we therefore turn “Bullish” on the stock as management’s renewed commitment to buybacks supports the shares.

Alexion_Drug Portfolio

Source: Company website

Long-term Undervaluation

Persistent undervaluation and investor demands for a sale have once again seen Alexion becoming the subject of a possible acquisition. A potential target of Amgen (AMGN) in 2019, the company has triggered interest from Biogen (BIIB) last month as the activist investor, Elliott Management, calls for a sale of the company questioning its strategic direction. Their logic is not without merit. Targeting ten product launches by 2023, the company is currently advancing twenty development programs, up from only four at the end of 2017. Since 2017, the top line has jumped ~55.9% through the LTM (last twelve-month) period, while the net income nearly doubled. Yet, the stock has dropped ~6.0% over the period, underperforming the 58.2% gain in the NBI (NASDAQ Biotechnology Index).

Alexion_Share Performance since 2017

Source: Koyfin

Underwhelming Revenue Guidance

Over