MRK - InflaRx N.V.: Late Entrant Into The Covid Space

2023-06-21 20:37:59 ET

Summary

• Today, we take our first look at InflaRx N.V. since 2021.
• The shares have largely marked time since our initial look at them, but the company just got FDA Emergency Use Authorization for its Covid treatment.
• Does that meaningfully change the dynamics of the company and its stock? An updated analysis follows in the paragraphs below.

Even in the mud and scum of things, something always, always sings .”? Ralph Waldo Emerson

InflaRx N.V. ( IFRX ) goes back into the spotlight for the first time since our initial article on this small cap developmental concern back in late 2021. We concluded that piece on InflaRx with stating at best it merited a small 'w atch item ' holding at the time. The stock currently trades almost exactly where it did when we posted our first research on the firm.

However, the company just garnered FDA Emergency Use Authorization for its treatment for Covid in April of this year. Does that push the stock into the full 'buy zone'? An updated analysis follows below.

Company Overview

InflaRx is headquartered in Germany. This now commercial stage biopharma concern is focused on discovering and developing inhibitors using C5a technology. The stock currently trades around $4.50 a share and sports an approximate market capitalization of $275 million.

On its website , the company goes into why it is targeting C5a in development.

C5a is a key player in many acute and also chronic inflammatory processes, making C5a a highly attractive pharmacological target. C5a is a small 74 amino acid spanning protein (approximately 11 KD) which is known to quickly interact with at least 2 independent receptors (C5aR and C5L2). C5aR has been well characterized as G-Protein coupled signaling receptor, which can be strongly upregulated in almost any tissue and cell, and in different disease settings. C5a therefore displays a short half-life, given the quick interaction with and the abundant number of the binding receptors ."

InflaRx's product portfolio and pipeline is centered around a first-in-class monoclonal anti-human complement factor C5a antibody called Vilobelimab, which is targeting several indications. Given the rest of the company's pipeline is pre-clinical, Vilobelimab will be the sole focus of this analysis.

Vilobelimab which goes by the brand name Gohibic. In early April, the FDA granted Emergency Use Authorization or EUA to Gohibic to treat hospitalized adults when initiated within 48 hours of receiving invasive mechanical ventilation ((IMV)), or extracorporeal membrane oxygenation. The company submitted this request in September of last year.

This EUA green light was provided based on data from a Phase 3 study that showed a relative reduction in 28-day all-cause mortality of 23.9% when compared to the placebo cohort in critically ill mechanically ventilated COVID patients.

It is important to note the company is in discussions with the FDA so it can submit a Biologic License Application or BLA for full marketing approval and is working to get Gohibic available in Europe as well.

This inhibitor is also targeting Cutaneous Squamous Cell Carcinoma as part of a combination therapy with Merck's ( MRK ) blockbuster anti-PD-1 therapy, KEYTRUDA. The first person in a Phase 2a study was dosed in June of 2021.

Gohibic is also being evaluated to treat Pyoderma Gangraenosum or PG, which is a rare skin disease that result in large, painful ulcers. Gohibic has been granted Orphan Drug status for this indication. Positive interim results from three cohorts of a Phase 2 study the company is currently conducting were recently released.

Analyst Commentary & Balance Sheet

Since FDA approval was granted, four analyst firms including SVB Securities and Raymond James have reissued Buy ratings on IFRX. Price targets proffered range from $8 to $21 a share. Credit Suisse maintained it Hold rating and $2 price target on IFRX three weeks before FDA Authorization. The analyst there had just to say about InflaRx's Covid prospects for its not approved drug.

While we acknowledge there may be some long-term demand for variant agnostic therapies, we note that the pandemic enters its fourth year with widely accessible vaccines, various oral and parenteral therapies, and a lower hospitalization rate, all of which is reflected in Actemra’s waning Covid sales. We also think some questions remain on supply, pricing, and execution and are cautious on the commercial opportunity until a clear picture of the drug’s utilization emerges, though potential licensing of the product could offer additional upside in the near term and mitigate some of the execution risk ."

Just under two percent of the outstanding float in the shares is currently held short. The company ended FY2022 with approximately €83.7 million of cash and marketable securities on its balance sheet. The company had total expenses in FY2022 of €52.4 million. In mid-April, InflaRx raised approximately $40 million via a secondary offering .

Verdict

The current analyst firm consensus is that InflaRx loses just over 60 cents a share in FY2023 as initial sales come in at just over $60 million for the year. They see losses falling to a dime a share in FY2024 as revenues surpass $105 million. It should be noted that analyst projections for revenues and losses vary very widely for this fiscal year and the next.

We might be having a different conversation about the potential of Gohibic if the drug had been approved 12-18 months earlier, when the pandemic was in full bloom and Covid was a huge focus area both in the news headlines and within the medical community. However, now the fears about the pandemic have faded and even Covid vaccine sales are falling precipitously.

Gohibic also inhibits the immune system, which could lead to significant side effects in some cases as a recent article on Seeking Alpha highlighted. In addition, the day 60 ' all-cause ' mortality in the Gohibic cohort of a phase 3 trial was 35% compared to 46% in the placebo group. Whether that ' moves in the needle ' in the real world is hard to determine. In addition, the company still has to go through the BLA process to garner full FDA approval for Gohibic.

Therefore, it is very hard to model what the sales trajectory of Gohibic will be both in the initial stages of its rollout as well as longer term. A key reason, analyst firm sales estimates for FY2023 and FY2024 are all over the place currently.

In addition, it is really hard to put together timelines not only for BLA submission but also for Gohibic's development timeline for the other two indications the drug is targeting. The company's website is sparse when it comes to this data and there are no company quarterly earnings transcripts available as well. While the recent FDA authorization may turn out to be a significant milestone, there is too much uncertainty around InflaRx to make any investment recommendation around the stock at this time.

Hope is the power of being cheerful in circumstances that we know to be desperate .”? G.K. Chesterton

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