Arbutus: Still Plenty of Upside Left Following Favorable Court Decision
Wednesday’s session started off promisingly but quickly deteriorated with all three indexes seeing out the trading activity in the red. However, that was of little concern to Arbutus Biopharma (ABUS) investors.
Arbutus shares took the up escalator, given a 44% boost following a favorable court of appeals decision. In direct relation to Arbutus’ surge, on the other side of the equation, Moderna shares lost 12%. So, how are these two connected?
A Federal Circuit Court of Appeals looking into the Patent Trial and Appeals Board’s (PTAB) decision to back Arbutus over the lipid nanoparticle (LNP) technology which Moderna has utilized in its Covid-19 vaccine, rejected the vaccine giant’s claims. Although Moderna had in the past licensed the LNPs from Arbutus for other uses, it argued they aren’t patentable. The court disagreed and upheld Arbutus’ patent claims.
LNPs are the minute fat bubbles that coat RNA-based vaccines and enable the vaccine to flow through the bloodstream to the target. Part of Arbutus’s business strategy is based on licensing the tech.
The court’s decision could put ABUS in line for royalties from the sales of Moderna’s Covid-19 vaccine or otherwise it stands to receive a notable one-off fee, which as JMP’s Roy Buchanan notes, could go toward the company’s pipeline development.
“Our main takeaway is that this is obviously positive for Arbutus and may eventually provide funding for the company's HBV programs (and could today if the company utilizes its ATM equity facility),” the analyst said. “Affirmation of the PTAB decisions a clear win for Arbutus' LNP IP.”
The shares might have seen out Wednesday carrying a mighty haul, but Buchanan sees plenty more upside ahead. The analyst reiterated an Outperform (i.e. Buy) rating, backed by a $9 price target, suggesting shares will climb by another 108% over the coming months. (To watch Buchanan’s track record, click here)
Looking at the consensus breakdown, the rest of the Street is on the same page more or less. 3 Buys and 1 Hold add up to a Strong Buy consensus rating. The $6.63 average price target puts the upside potential at ~55%. (See ABUS stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
