Company

Altimmune, Inc. (NASDAQ:ALT) is a clinical stage biopharmaceutical company, focused on developing treatments for liver disease, immune modulating therapies, and vaccines. The company develops HepTcell, an immunotherapeutic product candidate that has completed Phase I clinical trial for patients chronically infected with the hepatitis B virus; NasoShield, an anthrax vaccine to provide for protection after a single intranasal administration and NasoVAX, a recombinant intranasal vaccine product candidate. Its preclinical stage products include ALT-801, a novel peptide-based dual GLP-1/Glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis; and ALT-702, an investigational tumor immunostimulant for treating cancer. The company also develops veterinary product candidates.

Additionally, and most importantly, the company develops AdCOVID, a single-dose intranasal vaccine to protect against COVID-19, as well as T-COVID, which is an immune modulator for treating the early stages of COVID-19.

Source: Corporate presentation

COVID-19 Treatments

AdCOVID, which is the company’s vaccine, is due to begin a phase 1 trial in December 2020. This vaccine has several characteristics that appear to be superior to the leading, first generation, vaccines (I will refer to the first generation vaccines in the rest of the article as “G-1” or “G-1 vaccines”). These characteristics include:

  • Single-dose vaccine (to be fair, so is the J&J (NYSE:JNJ)vaccine).
  • Administered through a nasal spray rather than an injection.
  • Can be distributed with no cooling. Can be stored for months in room temperature.

T-COVID is aimed at treating early cases of COVID-19. Like AdCOVID, it is also an intranasal single-dose therapeutic. T-COVID phase 1/2 trial is ongoing with 96 confirmed COVID-19 patients randomized 1:1 to T-COVID or placebo. The trial’s primary endpoint is clinical worsening, defined as a decrease in oxygen saturation or hospitalization. I’m not sure the size of the population here is powered to generate statistically significant results, but hopefully, we should be able to see a directional result. Data readout of the ongoing trial is expected for Q1 2021.

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Is Current Valuation Attractive?

The company has a large pipeline, but all candidates are early stage. Pre-COVID-19, the company’s market cap was $25M, which should reflect the value ascribed by the market to all non-COVID-19 pipeline.

Today’s market cap is $348M. However, management was prudent enough to raise additional equity, and the balance sheet now has $207M (as of 9/30) for an EV of ~$140M. So, the big question is – are the two COVID-19 therapeutics worth that much?

On the one hand, results from the G-1 vaccines were impressive. Expectations were of a ~70% effectiveness, and actual effectiveness proves to be around 95%. The risk here is that enough people vaccinate such that Rt (Effective Reproduction Number) drops enough, and COVID-19 is eliminated altogether.

On the other hand, it is unlikely when vaccines will be available for the entire world’s population, which suggests outbreaks would continue. Additionally, current vaccines will probably not be effective for more than a year, and so, the population would need to be vaccinated again… and again. This process would give an opportunity for vaccines that did not get on the G-1 train. Specifically, the nasal feature should be extremely popular in children. Even though children don’t develop major COVID-19 symptoms, research suggests they spread the disease just as much as adults, and so vaccinating this population would be important (especially considering their tendency to congregate). How much would a vaccine/treatment for COVID-19 be worth? If this proves to be the treatment of choice for the world’s pediatric population, then probably much more than $140M.

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Summary

The company has an interesting pipeline – specifically, its two COVID-19 treatments. Both treatments have a readout during Q1 2021, which should provide near-term catalysts.

In terms of risk/reward, with $200M of cash on the balance sheet and a low burn rate (last quarter, the company only burned through $9.5M), and in the case the entire pipeline fails and is worthless, the share would drop about 50% to cash. However, if successful with its COVID-19 endeavors, the stock should rise at least 200% in the next year as a COVID-19 vaccine in children should be worth at least $1B. The risk reward here seems attractive.

Is ALT a COVID-19 loser as the share price reaction to G-1 vaccine results would suggest? The answer remains to be seen, but it might actually be a winner. The answer should emerge in the next few months.

Risks

  • COVID-19 could disappear.
  • Trials could fail.
  • Better therapeutics could emerge.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ALT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



Via SeekingAlpha.com

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