Arbutus Biopharma Corp ABUS stock has gained 80 percent since the turn of the year, and B. Riley FBR dropped its bullish stance Friday in the wake of the rally.
The Analyst
B. Riley FBR's Madhu Kumar downgraded Arbutus Biopharma from Buy to Neutral with an unchanged $9 price target.
The Thesis
Arbutus' lead asset, the RNAi drug ARB-1467, has shown efficacy in clinical trials, but the need for chronic steroid treatment may pose a "substantial efficacy barrier," Kumar said in the downgrade note. (See the analyst's track record here.)
Investors may want to wait for future clinical data reports from Arbutus' Hepatitis B pipeline, which also includes core inhibition and RNA destabilizers, before turning bullish again on the stock, Kumar said.
The equity's strong surge in 2018 mostly prices in opportunities from Alnylam Pharmaceuticals, Inc. ALNY related to its royalty agreement for patisiran, the analyst said.
Alnylam's follow-on drug, ALN-TTRsc02, could become a best-in-class therapeutic agent and even replace patisiran in hAATR disease, Kumar said. The possibility exists that Arbutus will be left out of the picture by the downstream clinical success of ALN-TTRsc02, he said.
Kumar's $9 price target is based on a sum-of-the-parts valuation on 2030 estimates, including the following:
- ARB-1467 valued at 65 cents per share.
- AB-506 worth $3.12 per share.
- Patisiran royalties worth $1.54 per share.
- Other programs worth 56 cents per share.
- $3.13 per share in cash.
Price Action
Arbutus shares were trading down 2.75 percent at $8.85 at the time of publication Friday.
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