Two weeks ago, Oppenheimer analyst Kevin DeGeeter assured investors that despite there being no specific timeline for Humanigen’s (HGEN) lenzilumab hypoxia drug receiving Emergency Use Authorization (EUA) in the United States, the potential for the drug to win approval was “strong” — strong enough to merit an Outperform (i.e. Buy) rating and a $30 price target on Humanigen stock.
Two weeks later, Humanigen stock just crashed over 50%, and DeGeeter has revised his assessment. Now the analyst says the stock is worth barely half his previous estimate ($17 a share) — and the reason for that can be summed up in three little letters:
FDA.
On Thursday, the U.S. Food and Drug Administration declined to grant lenzilumab EUA for use in treating hypoxic coronavirus patients, saying it was “unable to conclude that the known and potential benefits of lenzilumab outweigh the known and potential risks of its use as a treatment for COVID-19” (but inviting Humanigen “to submit additional data”). For its part, Humanigen said it remains “committed to bringing lenzilumab to patients hospitalized with COVID-19” and hopes that its “ongoing ACTIV-5/BET-B trial, which has been advanced to enroll up to 500 patients, may provide additional safety and efficacy data sufficient to support our efforts to obtain an EUA to treat hospitalized COVID-19 patients.”
DeGeeter hopes so, too, and indeed, that hope is what the analyst is betting on as he reiterates his Outperform rating on Humanigen stock despite Thursday’s disheartening news. (To watch DeGeeter’s track record, click here)
As the analyst explained, the “ongoing surge in global COVID-19 cases should support timely completion of enrollment for ACTIV-5 study and potential resubmission of EUA in 1H22.” Moreover, in DeGeeter’s view, there’s the potential for Britain’s Medicines and Healthcare products Regulatory Agency (MHRA) and/or the EU’s European Medicines Agency to approve lenzilumab before the FDA does. In support of this theory, DeGeeter cites at least two other Covid-19 therapies for which the MHRA, EUA — or both — have acted to clear drugs for use before the FDA did.
That’s the good news. Now here’s the bad:
Instead of getting approval from one big drugs agency right away (DeGeeter had hoped that FDA would approve as early as this current Q3 2021), with one or two additional approvals coming later, it now looks like none of the Big 3 are likely to clear lenzilumab for use before the first half of next year.
Factoring in the FDA setback, DeGeeter says he is “pushing back [his base case scenario for U.S.] EUA 12 months” (i.e. to Q3 2022), although allowing for the possibility of MHRA clearance coming through a little earlier — Q2 2022. And waiting 12 additional months for approval is the reason he just subtracted $13 from his price target for Humanigen stock.
Of even more concern to investors, with lenzilumab now likely to arrive rather late to the Covid-19 game, DeGeeter’s long term estimate for revenues that can be generated from the drug’s sales falls from “$1.45B in cumulative COVID-19 revenue by 2025E” to just “$460M in cumulative COVID-19 revenue by 2025E” today.
Is it any wonder investors are upset?
So, that’s Oppenheimer’s view, let’s turn our attention now to rest of the Street: HGEN’s 4 Buys, 1 Hold and 1 Sell coalesce into a Moderate Buy rating. Meanwhile, the average price target stands at $19.40 and implies ~199% upside from the current levels. (See HGEN stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
