Analysts at Roth Capital Partners hailed Seelos Therapeutics Inc’s (NASDAQ:SEEL) new game plan for its SLS-002 intranasal ketamine depression drug for treating patients suffering from suicidality in major depressive disorder (MDD).
Roth Capital currently has a Buy recommendation and $8 price target on Seelos stock, which presently trades in the $0.93 range.
The New York-based clinical-stage biopharmaceutical company also said it is amending its agreement with Vyera Pharmaceuticals for the development of SLS-002.
READ: Seelos Therapeutics plans to study SLS-002 in patients at risk of suicide
“Seelos announced an amendment in its agreement with Vyera that allows Seelos to focus first on SLS-002 in MDD, which we view as a well thought-out decision based upon FDA guidance and the more substantial market opportunity in MDD versus Post-traumatic stress disorder (PTSD),” wrote Roth Capital analyst Yasmeen Rahimi in a note to clients on Tuesday.
Eye on the prize
The analyst noted that Seelos has made a sound strategic decision to pursue suicidality in major depressive disorder, significantly expanding the market opportunity beyond PTSD, which it still plans to target in the future.
The amendment also removes the requirement to conduct a Phase III trial and converts the one-time cash payment obligation — owed to Vyera for the commencement of the Phase III trial — to a series of cash and stock payments over the next nine months.
“In our view, this has both clinical development implications (quicker enrollment) and broadens the commercial potential for SLS-002,” said Rahimi.
“The single payment owed to Vyera ($3.5 million upon dosing of the first patient in Ph3) will be converted into Series A cash and stock over the course of the next 9 months. Importantly, this change puts Seelos at a financial advantage, which in our view will prove to be crucial for funding its planned SLS-002 trials in the short-term,” she added.
Based on feedback from its Type C meeting with the Food and Drug Administration, Seelos said it plans to conduct a Phase II Proof of Concept trial in MDD.
“Discussions with management also revealed additional nuances on strategy going forward, including a Ph1 study to establish SLS-002's PK/PD and DDI profile, safety differentiation from Spravato, as well as a Ph2 POC study to start in 2Q20,” she added.
Valuation
Seelos Therapeutics has catalysts for its ketamine depression drug, and multiple shots on goal with a strong pipeline. The company has strong late-stage pipeline drugs, like SLS-005, which target rare orphan diseases. SLS-005, or trehalose, is a protein stabilizer, that will begin a pivotal trial in Sanfilippo Syndrome in the second quarter, fully funded by the Team Sanfilippo Foundation.
“Our $8/share price target, rounded, is derived from a risk-adjusted net present value analysis, based on 1) $6.60/share for SLS-002 for acute suicidality in the U.S. (launch 2024, 65% POS, $1.68B peak sales); 2) $1.00/share for SLS-005 for Sanfilippo in US (launch 2022, 35% POS, $423.5M peak sales); and 3) $0.90/ share for SLS-005 for OPMD in US (launch 2022, 35% POS, $231.5M peak sales),” said Rahimi.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
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