BioCryst Pharmaceuticals

BioCryst Pharmaceuticals (NASDAQ: BCRX) develops novel oral, small-molecule medicines which are used for the treatment of rare diseases.

Key Updates:

• Approval of ORLADEYO™: Recently, the group declared the Ministry of Health, Labor and Welfare (MHLW), Japan has approved marketing and manufacturing of oral, once-daily ORLADEYO™ (berotralstat) 150 mg medicine, which is used for the prophylactic treatment of hereditary angioedema (HAE) in adults and pediatric patients above 12 years.
• Impressive Guidance: The company has an impressive product pipeline for FY21, wherein it will indulge in advanced development of BCX9930. The company would start a trial in PNH patients and would begin proof-of-concept trial(s) in patients with renal complement-mediated diseases. Moreover, the company would start Phase 1 Healthy Subject Trial Design for BCX9250.

Q3FY20 Financial Highlights:

• BCRX announced its quarterly results, wherein the group posted a total revenue of USD 6.102 million, significantly higher than USD 1.775 million in the previous corresponding period (pcp). Income from product sales was higher at USD 2.478 million compared to USD 0.335 million in pcp. Moreover, income from Collaborative and other research and development (USD 3.370 million versus USD 0.932 million in Q3FY19) also contributed to the top line growth.
• Total operating expenses stood at USD 48.996 million, higher than USD 36.873 million in pcp, due to increase in research and development (USD 30.245 million versus USD 25.120 million in pcp), higher selling, general and administrative expense (USD 17.195 million versus USD 11.735 million in pcp).
• Net loss widened to USD 46.115 million, from USD 37.592 million in pcp, due to higher operating expenses, partially offset by a slightly lower interest expense (USD 2.297 million versus USD 3.044 million in pcp).
• The group reported cash and cash equivalent of USD 96.492 million, while total assets were recorded at USD 176.226 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The company has an encouraging product pipeline, while it requires to pass the trials for approval of the particular medicine, which is time-consuming and possesses high degree of uncertainty as well. Moreover, higher research and development costs would take a toll on the company’s profitability.

Stock Recommendation:

The stock of BCRX soared ~208% and ~315% in the last three months and one year, respectively. Recently, the group received approval for marketing and manufacturing for once-daily ORLADEYO™ medicine, and hence, received tremendous traction from the investors. Meanwhile, the stock surged ~59% in the last one month and ~29%, in the last one week, respectively. Moreover, the company would conduct trials for Fibrodysplasia Ossificans Progressiva (FOP), which is a rare disease and affects approximately 1 in 2 million people worldwide. However, the rising R&D costs and higher selling and marketing expense are likely to dampen the company’s profitability in the coming days, as the group is yet to report a stable revenue base. Notably, the stock is closed near the upper band of its 52-weeks trading range of USD 12.04 and USD 1.58. On the valuation front, the stock is trading at forward EV to Sales multiple of 31.3x, which is significantly higher than the industry median of 17x. Hence, considering the aforesaid facts, we recommend an ‘Expensive’ rating on the stock at the closing price of USD 11.85 on February 1, 2020, and would advise investors to wait for a better entry point.

BCRX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Vaxart Inc

Vaxart Inc (NASDAQ: VXRT) is a clinical-stage biotechnology company focused on developing oral tablet vaccines designed to generate mucosal and systemic immune responses that protect against a wide range of infectious diseases and have the potential to provide sterilizing immunity for diseases such as COVID-19.

Key highlights 

• The company is under investigation: Bragar Eagel & Squire, P.C.,a nationally recognized shareholder rights law firm, is investigating potential claims against the company on behalf of long-term stockholders. The company’s investigation concerns are whether the board of directors of “Vaxart” have breached their fiduciary duties to the company or not. Their investigation follows a securities class action complaint filed against “Vaxart” on August 24, 2020. 

• Pre-Clinical and Clinical Developments: Recently, the group completed the enrollment of the Company’s Phase 1 study of VXA-CoV2-1, oral tablet COVID-19 vaccine candidate. The group also reported COVID-19 Hamster Challenge Study data showing protection against COVID-19 in hamsters receiving two oral doses of Vaxart’s oral vaccine.

Source: Company

• Manufacturing update: The company has expanded its collaboration with Kindred Biosciences for the manufacturing of its COVID-19 oral vaccine. Kindred’s California plant would be responsible for scaling the COVID-19 clinical trial material into mid-size bioreactors and the Kansas plant would be responsible for manufacturing at 2000L scale in its single use bioreactors.

• Healthy cash position: The company ended the quarter with cash and cash equivalents of USD 133.4 million compared to USD 44.4 million as of June 30, 2020. The increase was primarily due to net proceeds of USD 97.0 million for the issuance of common stock, partially offset by USD 9.3 million of cash used in operations.         

Financial overview of Q3 2020 (In thousands of USD)

Source: Company 

• In Q3 2020 the company registered revenue of USD 265,000 compared to USD 454,000 in the previous corresponding period. The decrease was principally due to a reduction in revenue from their contract with Janssen, for which activities were mostly completed between July 2019 and June 2020.
• The company's operating loss stood at USD 7.5 million, compared to USD 4.7 million in Q3 2019. Higher R&D expenses and G&A expenses were the main reason behind the higher operating losses.
•  The company's net loss stood at USD 8.1 million for the reported quarter, compared to USD 5.3 million in Q3 2019. The increase in net loss was mainly due to the rise in operating expenses. 

Risks associated with investment

The company is subject to multiple legal proceedings. It may be subject to additional legal proceedings, which may result in substantial costs, divert management’s attention, and have a material adverse effect on its business, financial condition, and operations results. 

Stock recommendation

The group recently completed the enrolment of the Company's Phase 1 study of VXA-CoV2-1, its oral tablet COVID-19 vaccine candidate. The group has also expanded its collaboration with Kindred Biosciences for the manufacturing of COVID-19 oral vaccine. Although, the company has achieved substantial progress in trails along with having decent cash and no debt on balance sheet, VXRT is under investigation by the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) for insider trading and inaccurate statements regarding its role in Operation Warp Speed (OWS). Hence, we prefer to remain on the side-line and recommend an "Avoid" rating at the closing price of USD 15.57 on February 1, 2021. However, investors with high risk-reward profile might take the position in the stock.

Source: Refinitiv (Thomson Reuters)

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