BTIG launched coverage of Axcella Health (NASDAQ:AXLA) with a “buy” rating and $10 price target. The stock closed at $4.66 on April 30.
“We view Axcella’s calculated approach to correcting metabolic diseases with endogenous metabolic modulators, [which are] generally naturally occurring metabolites in highly refined ratios, as extremely high-science, albeit based on safe and well-understood components,” writes analyst Julian Harrison.
Despite the intense clinical activity, he said there is a paucity of effective nonalcoholic steatohepatitis (NASH) regimens that are user-friendly enough to be true chronic “backbone” therapeutics – the role targeted by Axcella’s, AXA1125/1957.
Axcella’s second clinical asset, AXA1665, is the first therapeutic approach focused on correcting muscle metabolism of toxic ammonia as a true disease-modifying therapy for hepatic encephalopathy, a decline in brain function that occurs as a result of severe liver disease, he added.
With these clearly defined therapeutic goals, Mr. Harrison said the key question for investors is how much definitive data has been generated to date in these specific programs and when will they be on firmer footing?
“Toward this de-risking, a healthy amount of patient-derived biomarkers and safety data leaves Axcella well-positioned for its next wave of catalysts later this year,” Mr. Harrison said. These proof-of-mechanism readouts could support the start of a registrational study in overt hepatic encephalopathy by the fourth quarter of 2020 and a Phase 2 proof-of-concept study in NASH by the first half of 2021, he added.
“With Axcella trading close to net cash, a [cash] runway into mid-2021, an unusually capital-efficient approach, and early signs of dose-dependent efficacy in large diseases, we see favorable risk/reward ahead of Axcella’s next inflection points,” Mr. Harrison said.
