Liminal BioSciences Inc. LMNL

Paradigm Capital: Buy rating and $3.75 target price for PLI

[shakerman640]

According to Paradigm Capital:

https://is.gd/TeT0kf

ProMetic Life Sciences Inc.

Stock Rating: Buy

12Month Target: $3.75

FDA Accelerates PBI4050 to Pivotal Trials in IPF

Investment Thesis. PLI offers an attractive risk/return opportunity owing to: 1) the base revenue provided by resin sales to licensees; 2) the signed partners who bring financial and commercial support to develop plasma products; and 3) the blue sky provided by additional partnership/licensing deals and the Small Molecule Therapeutics business.

Event

ProMetic announced a successful pre-IND meeting with the U.S. FDA whereby PBI-4050 will be advanced to a pivotal study for Idiopathic Pulmonary Fibrosis (IPF).

Details

- PBI4050 on the regulatory fasttrack for IPF: We expected the FDA to require PLI to expand the Canadian Phase II trial to the U.S. to demonstrate proof of concept prior to a U.S. pivotal study. The decision to move directly to a pivotal study could shorten the clinical program timelines by 12 months. The study protocol is in development and the company expects to file the IND for this pivotal study in Q1/16. We expect the study to run to H2/17.

- FDA validates nonclinical data: In the absence of efficacy data from PLI’s ongoing Phase II IPF trial in Canada, we believe the FDA based its decision on compelling non-clinical data and a strong safety profile shown in humans. We believe this shows the FDA’s confidence in the validity of the animal model and the potential translation of results to humans.

- Three shots on goal for IPF: The regulatory pathway for PBI-4050 in IPF has now been established. As an add-on therapy, PBI-4050 now has two additional chances of success as a combination therapy with ether Esbriet and Ofev, the only approved drugs in the market. We believe this diversifies risk concentration in PBI-4050 as a stand-alone therapy and provides additional upside potential.

- Increased attractiveness to potential suitors: We expect management to eventually sell or partner PBI-4050. As such, we believe the accelerated clinical program, orphan status and potential as an add-on therapy makes PBI-4050 very attractive to big pharma. As such, we expect Roche and Boehringer Ingelheim (owners of Esbriet and Ofev) to be potential partners. Partnership would likely include substantial upfront payments.

Conclusion

PLI has reached a critical milestone in the PBI-4050 program as the outcome of the pre-IND meeting far exceeded both expectations and management’s. Although we still view the PBI- 4050 program as high risk, the new regulatory pathway provides a shorter journey and three potential roads to success. We continue to be increasingly positive on PBI-4050 and feel that investors are gaining this potentially multi-billion dollar drug for free at current levels. We maintain our Buy recommendation and $3.75 target.