William Blair Reaffirms Outperform On KaloBios As Sanofi Returns Global Rights To KB001-A

After the markets closed Monday,July 28, KaloBios Pharmaceuticals (KBIO) announced anagreement with Sanofi (SNY), which returns all rights to the KB001-A program. In addition, KaloBios reported the completion of enrollment with KB001-A in the cystic fibrosis (CF) indication.

In reaction to the news, William Blair analyst John Sonnier reaffirmed an Outperform rating on KBIO. No price target was assigned.

Sonnier wrote, “Under the agreement announced after the close, Sanofi surrenders the rights to the ventilator-associated pneumonia disease setting, providing KaloBios with alternative partnership opportunities. In return, Sanofi is entitled to receive low-single-digit royalties on KB001-A sales, up to a $40 million cap. Sanofi is also eligible to receive up to 10% sub-license and milestone payments, which is subject to a separate $40 million cap. We view the news as a positive to the stock as the agreement provides KaloBios additional business development flexibility around the KB001-A asset”.

The analyst added, “Management attributed the increased rate of enrollment to the decreased competition from other clinical studies in the CF space. In our opinion, KaloBios stands to benefit from increased interest in partnership opportunities with KB001-A, pending positive data in the CF indication. Notably, given the program had already received Fast Track designation from the FDA, the potential partner couldproceed directly to a pivotal trial, which in our view could be registration enabling. We believe clinical success in the PhaseII CF trial of KB001-A would sufficiently derisk the asset, and we are therefore encouraged by the asset’s partnership potential”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform analyst John Sonnier has a 44.5% average return and a 87.5% success rate. Sonnier is ranked #337 out of 3189 analysts.

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