BMO Capital Markets: BioXcel's AI Platform Provides Partially Derisked Drug Candidates

BioXcel Therapeutics Inc BTAI recently went public, offering 5.45 million shares at $11 each. 

The Analyst

BMO Capital Markets analyst Do Kim initiated coverage of BioXcel Therapeutics with an Outperform rating and $23 price target, suggesting 125-percent return potential.

The Thesis

BioXcel's lead program BXCL501 for acute agitation is partially derisked, given that the underlying drug dexmedetomidine is FDA-approved in IV form, Kim said in a Monday note. (See the analyst's track record here.) 

The pipeline candidate's sublingual formulation and favorable efficacy/safety profile will help the company consolidate a fragmented market in schizophrenia, bipolar and Alzheimer's dementia patients.

BMO estimates worldwide peak sales of $2.4 billion in the above indications, risk-adjusted to $724 million.

The analyst said he expects accelerated clinical development through the 505(b)(2) regulatory pathway, with BXCL501 likely reaching pivotal studies by the first half of 2019. 

Although BioXcel's second asset, BXCL701 for NEPC/pancreatic cancer, could provide significant upside on the basis of efficacy signals in prior trials, according to BMO, the sell-side firm is not assigning any value to the drug. 

The pipeline drugs were identified by BioXcel's parent company's proprietary artificial intelligence platform, EvolverAI, Kim said. The platform provides partially derisked assets that can be evaluated in smaller and shorter clinical trials, the analyst said. 

"BioXcel has an exclusive collaboration relationship, which should provide additional pipeline asset for long-term growth." 

The Price Action

After closing at $11.03 on its debut session, the shares of BioXcel have lost about 7 percent.

At the time of writing, the shares were rallying 6.59 percent to $10.91.

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