Healthcare Analysts Weigh in on Catalyst Biosciences’ (CBIO) Clinical Hold

Some investors might love biotech stocks for their lottery ticket-like returns when a company strikes medical gold. A lottery ticket, however, costs only a buck or two, while getting a biotech company wrong can hurt a lot more than that. Case in point: Catalyst Biosciences (NASDAQ:CBIO) shares crashed 64% yesterday after the drug maker placed its Phase I/II trial of CB2679d/ISU304 (2679d) on hold.

CBIO disclosed that the first two patients in Cohort 6 developed neutralizing antibodies, one transiently, to their engineered Factor IX (FIX) indicated for prophylactic treatment of severe hemophilia B. As such, the company stopped enrolling patients in Cohort 6 pending an analysis to determine why these two patients developed neutralizing antibodies.

B. Riley FBR analyst George Zavoico commented, “We estimate that it may take at least one year to determine the cause, possibly delaying resumption of this trial by 1.5 to two years, if at all. Moreover, while neutralizing antibodies have not been detected with Catalyst Bio’s activated Factor VIIa (FVIIa), marzeptacog alfa, even after one patient having received 99 daily doses, we believe this product will face increased scrutiny going forward. Patients in the Phase II portion of a Phase II/III trial of marzeptacog are continuing treatment. At this time we are evaluating possible outcomes and have placed our rating and price target under review.” (To watch Zavoico’s track record, click here)

Chardan analyst Gbola Amusa sounds more optimistic on the drug maker. The analyst sees a high conviction opportunity in CBIO shares from here, given upwardly skewed risk-reward dynamics on two main scenarios:

  • Scenario 1, A CB 2679d issue (vast upside, perhaps +300%): If the NAb issue is specific to CB 2679d and/or potentiated by the “primeboost” phenomenon, vast upside would be possible with progress on MarzAA. CBIO’s 24% discount to cash would seem an exceptional opportunity given phase II MarzAA data expected in the near term, i.e. over 18-21 July at ISTH (Dublin).
  • Scenario 2, a platform issue (limited downside, perhaps -25%): If the NAb issue were a platform issue, we would not expect CBIO to trade below $7/share (a roughly 40% discount to cash). Any trading below $7/share we think would attract M&A interest in CBIO, given private companies that might see CBIO as a means to be Nasdaq listed.

Amusa slashed his price target for CBIO to $35 (from $75), while maintaining a Buy rating on the stock. (To watch Amusa’s track record, click here)


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