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Thursday, October 22, 2020

Big News Powers Breakout in Arbutus Biopharma Corp (NASDAQ:ABUS)

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Arbutus Biopharma Corp (NASDAQ:ABUS) is a biotech play that exploded higher on Friday in reaction to key news that helps frame a narrative for the company. In short, the company announced that it has licensed its proprietary lipid nanoparticle (LNP) technology to Alexion Pharmaceuticals, Inc. for exclusive use in one of Alexion’s rare disease programs.

According to the release, this transaction enables Alexion to address delivery for therapeutic application of messenger RNA (mRNA) and rapidly enter clinical development with its mRNA product candidate. Under the terms of the license agreement, Alexion will pay Arbutus $7.5 million upfront, and payments of up to $75 million for achievement of development, regulatory, and commercial milestones, as well as single digit royalties. In addition, Arbutus will conduct technology development and provide manufacturing and regulatory support for the rapid advancement of Alexion’s mRNA product candidate.

Arbutus Biopharma Corp (NASDAQ:ABUS) bills itself as a biopharmaceutical company that develops and commercializes therapeutics for the treatment of chronic hepatitis B (HBV) infections in Canada and the United States.

The company also develops a pipeline of products based on RNA interference therapeutics (RNAi). Its lead candidate is ARB-1467, a multi-component RNAi therapeutic product that is designed for the elimination of HBV surface antigen expression in patients chronically infected with HBV. Its HBV product candidates also comprise ARB-1740, an RNAi HBV candidate that is in preclinical studies; small molecule cccDNA formation inhibitors for reducing the amount of cccDNA in the infected liver cell; HBV core protein assembly inhibitors; ARB-1598, a toll-like receptor; surface antigen secretion inhibitors; cccDNA epigenetic modifiers; stimulator of interferon genes agonists; and cyclophilin inhibitor drug candidates, including OCB-030 and other cyclophilin inhibitors.

In addition, it develops TKM-PLK1, an oncology product platform that is in Phase I/II clinical trials for the treatment of gastrointestinal neuroendocrine tumors, adrenocortical carcinoma, and hepatocellular carcinoma; TKM-HTG, a multi-component RNAi therapeutic that targets a combination of genes expressed in the liver, which play a role in triglyceride metabolism; and TKM-ALDH, an aldehyde dehydrogenase to induce long-term acute sensitivity to ethanol to treat severe alcohol use disorder.

Furthermore, its partnered programs consist of ALN-TTR02, which is in Phase III clinical study, a therapeutic targeting transthyretin-mediated amyloidosis; ALN-VSP for liver cancer; ALN-PCS02 for hypercholesterolemia; Marqibo for treating Philadelphia chromosome-negative acute lymphoblastic leukemia; and DCR-PH1 for primary hyperoxaluria type 1.

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As noted above, shares of ABUS blasted off on Friday in response to the licensing agreement with Alexion. The worst case scenario under the terms of the agreement mean $7.5M flows in for the company. As you can imagine, management was fired up:

“This agreement validates our leadership position in LNP technology and underscores the value of this platform in enabling RNA therapeutics. We are excited to be working with Alexion to advance a treatment for rare disease,” said Dr. Mark J. Murray, Arbutus’ President and CEO. “Our core focus as a company remains the cure of HBV.  This transaction with Alexion illustrates the value of our LNP platform, which has broad potential to deliver mRNA and gene editing therapeutics. We are receiving significant interest from companies that require access to our LNP platform to enable their own development programs. Our LNP expertise and intellectual property will contribute both near and long term value to Arbutus.”

The chart shows 26% added to share values of the stock over the past month of action, but this action is running counter to the larger trend in the name. The situation may be worth watching. ABUS has a track record that includes a number of dramatic bounces. What’s more, the stock has witnessed a pop in interest, as transaction volume levels have recently pushed a bit over 300% above the average volume levels in play in this stock over the longer term.

Currently trading at a market capitalization of $186.3M, ABUS has a significant war chest ($26.6M) of cash on the books, which compares with virtually no total current liabilities. That’s an excellent balance sheet. The company is also pulling in trailing 12-month revenues of $14.4M. If there’s a chink in the armor here, it’s the y/y drop in sales, That said, this news runs against the grain of that bear argument nicely, and may give the stock a strong basis for some legs on the move. For continuing coverage on shares of $ABUS stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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