Baird Downgrades Arbutus Biopharma (ABUS) to Neutral; Upside from Moderna IPR Win Priced In

(Updated - July 24, 2020 8:48 AM EDT)

Baird analyst Madhu Kumar downgraded Arbutus Biopharma (NASDAQ: ABUS) from Outperform to Neutral with a price target of $4, saying the upside from the Moderna IPR win is priced in.

The analyst commented, "While potentially impressive, given MRNA's near-term revenue opportunity for COVID-19 vaccine mRNA-1273 (discussed in our July 15 Arcturus Therapeutics (ARCT) company note), we believe a simple back-of-the-envelope analysis suggests that opportunity has been largely valued in. Specifically, if we assume peak sales of mRNA-1273 of $4B (100M doses at $40/dose, roughly in line with the recent BioNTech [BNTX, not covered] and Pfizer [PFE, not covered] US contract), a 2.33% royalty rate for ABUS (in line with the Onpattro peak royalty rate, as per ABUS' 1Q20 10- Q), a 40% share of the royalty via Genevant (which owns the exclusive rights to ABUS' LNP technology ex-HBV, as per ABUS' 1Q20 10-Q), and an 8x valuation multiple for said royalty revenues (assuming that royalty revenues represent effective EBIT), we get to roughly $298.2M for the mRNA-1273 royalty going to ABUS. That $298.2M of value assumes a 100% probability of approval for mRNA-1273 (despite the absence of clear evidence of immune protection for COVID-19 and safety issues discussed in our July 15 ARCT company note) and 100% chance that ABUS will receive a license from MRNA (despite the lack of "clear and convincing" evidence mRNA-1273 utilizes a LNP covered by ABUS' patent estate). Overall, given all the uncertainties, we are moving to the sidelines on ABUS vis-a-vis the LNP IPR win with MRNA."

For an analyst ratings summary and ratings history on Arbutus Biopharma click here. For more ratings news on Arbutus Biopharma click here.

Shares of Arbutus Biopharma closed at $7.20 yesterday.

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