Satellos Bioscience is undervalued, Leede says

Leede Monetary analyst Douglas Loe initiated protection of Satellos Bioscience (Satellos Bioscience Inventory Quote, Chart, Information, Analysts, Financials TSX:MSCL) on January 28 with a “Speculative Purchase” ranking and a one-year value goal of $2.25, citing the corporate’s differentiated method to treating Duchenne muscular dystrophy (DMD) and a number of upcoming medical catalysts.

Satellos is a Toronto-based, clinical-stage biotechnology firm targeted on creating therapies for degenerative muscle illnesses, with its lead program focusing on DMD. The corporate’s flagship asset, SAT-3247, is an orally administered, small-molecule inhibitor of adaptor-associated protein kinase 1 (AAK1) and is presently in Section II improvement.

At present ranges, Loe mentioned his $2.25 goal implies a one-year return of roughly 68%, which he believes is achievable primarily based on the upcoming Section I/II medical milestones and the differentiated nature of SAT-3247’s regenerative method to Duchenne muscular dystrophy…

Loe mentioned SAT-3247 stands aside from current and rising DMD therapies by pursuing a regenerative mechanism geared toward restoring muscle operate, somewhat than making an attempt to extend dystrophin manufacturing via RNA- or adeno-associated virus (AAV)-based gene therapies. These approaches, he famous, have proven restricted efficacy in sufferers with mutations affecting the dystrophin gene.

Interim Section II knowledge from two separate medical research—one in grownup sufferers and one in pediatric sufferers—are anticipated earlier than year-end. Loe mentioned these readouts signify near-term catalysts that might materially affect the inventory.

Leede’s valuation is predicated on a internet current worth framework utilizing a 30% low cost charge, which Loe mentioned is suitable for a Section II-stage drug developer, alongside multiples utilized to forecast fiscal 2031 EBITDA and EPS of US$81.0-million and US$0.26 per share, respectively. The enterprise worth calculation is anchored to fiscal Q3 2024 stability sheet knowledge, together with US$19.3-million in money and no long-term debt, and assumes a notional absolutely diluted share rely of 231.4 million, reflecting the potential want for added fairness financing to fund ongoing medical and regulatory actions.

Loe’s mannequin assumes Section III testing for SAT-3247 might start in fiscal 2027, with efficacy knowledge accessible by fiscal 2029. On that timeline, he expects potential FDA approval and a partnered industrial launch in fiscal 2030. The mannequin forecasts first-year U.S. royalty income and EBITDA of US$31.5-million and US$9.1-million, respectively, rising to US$102.9-million in income and US$81.0-million in EBITDA in fiscal 2031, the primary full 12 months of U.S. commercialization, with further contributions from EU and U.Okay. gross sales starting within the again half of fiscal 2031. Income and EBITDA are projected to extend additional to US$165.0-million and US$146.4-million in fiscal 2032.

Loe mentioned Satellos might appeal to curiosity from bigger pharmaceutical companions or acquirers as SAT-3247 advances, significantly companies with current uncommon illness or DMD franchises, although his valuation doesn’t explicitly ascribe worth to that chance. He additionally famous that Satellos lately introduced a 12-for-one share consolidation, which Leede expects to include into its mannequin as soon as accomplished.

At present ranges, Loe mentioned his $2.25 goal implies a one-year return of roughly 68%, which he believes is achievable primarily based on the upcoming Section I/II medical milestones and the differentiated nature of SAT-3247’s regenerative method to Duchenne muscular dystrophy.

Loe mentioned Satellos is anticipated to publish a US$21.0-million Adjusted EBITDA loss on income of US$20.6-million in fiscal 2029, reflecting continued medical improvement spending forward of commercialization. He expects these figures to enhance to Adjusted EBITDA of US$9.1-million on income of US$7.1-million in fiscal 2030, as SAT-3247 advances towards approval and preliminary royalty contributions start to emerge.

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