Further upside is expected from this biotech, as a result of ongoing data on the company’s drug’s trials.
BioXcel Therapeutics, Inc. (BTAI)
From Canaccord Genuity Research
BioXcel Therapeutics, Inc. (BTAI) has had a solid run with the stock up ~128% this year (S&P: +4.0%; XBI: +2.5%), even after accounting for last night’s offering. We had previously singled
out under-followed BTAI as having the potential to be the next central nervous system (CNS) stock that was primed for a big move.
With many more investor eyes on the stock now, we view the low-hanging-fruit component of our contention as having played out well. That said, we believe our BUY thesis on BTAI remains firmly on track as we see clear potential for further upside as we go into the mid-20 data readouts on BXCL501 (sublingual dexmedetomidine film), which is BTAI’s lead asset. Specifically, we like the risk-reward on the shares ahead of Phase 3 data for BXCL501 in agitation in schizophrenia/bipolar disorder (SERENITY; two trials), and the Phase 1b/2 data for agitation in dementia.
Our favorable view here is supported by the robust Phase 1b/2 data that BTAI presented in schizophrenia, where there was a clear dose dependence, and solid proof-of-concept data in dementia. We also like the potential for BXCL501 to be used in opioid withdrawal symptoms, which is an indication that we are adding to our model/valuation, among other changes. Our new price target of $68 implies ~100% upside from current levels, and we are reiterating our BUY.
At a high level, we like how management is positioning BTAI to be a leader in the treatment of agitation. On this, we note BTAI’s initiatives on 1) wearables (see here) and 2) a single-use injectable for severe agitation. We also like how BTAI is expanding dex’s potential from use in an acute agitation setting to chronic treatment. In this context, treatment of opioid withdrawal symptoms is important as it delves into sub-chronic dosing. Longer term, we expect to hear more about BTAI’s development of dex in combination with an as-yet-unidentified agent to target chronic agitation in dementia.
We now include a contribution from opioid withdrawal symptoms at a 40% probability of approval, with a launch in 2023E and unadjusted peak sales of $472mn in 2030E. We still model launches in agitation in schizophrenia/bipolar disorder in 2021E and in dementia in 2022E. We are modestly raising our probability of approval estimate in schizophrenia/bipolar disorder from 65% to 75% but keeping our 2030E unadjusted peak sales at $313mn. On agitation in dementia, we remain at 65% probability, but our 2030E unadjusted peak sales are $584mn vs. $513mn (as we start with a higher patient number that more accurately reflects market size). Our starting net price per film stays at $150. Given the potential for patent protection to the mid-2030s, we model a higher terminal contribution from 501. As BXCL701 (immuno-oncology) continues to evolve from a program/safety perspective, we are removing the prior modest contribution from the asset; some data are coming in 2020.
We include shares from the recent offering and continue to model more capital raising on the back of data. Finally, given the relatively de-risked neuro asset (vs. oncology), we are lowering our discount rate from 15% to 12%. Based on these changes, we are raising our PT from $27 to $68.
For some time now, our view on BXCL501 is that it remains a relatively de-risked asset in the agitation setting. We also received confirmation of this view when we recently had management out on the road and meeting investors in New York City. Based on the robust Phase 1b/2 data for BXCL501 in schizophrenia, we like the product’s chances going into the pivotal data readout in mid-20. Recall the SERENITY program contains two Phase 3 trials, i.e., one each in agitation in schizophrenia and bipolar disorder.
Sumant Kulkarni & Jia Min, Canaccord Genuity Research, www.canaccordgenuity.com, February 2020