VIR - Sticking With Vir Biotechnology

2024-01-17 15:20:13 ET

Summary

• Today, we revisit Vir Biotechnology, Inc. for the first time in nearly a year.
• The stock took a tumble in July on the back of the trial setback, but the company has multiple shots on goal within its advancing pipeline.
• The company also has some $1.7 billion in cash, received $50 million in additional funding from BARDA for research on antibody therapies, and has no long-term debt.
• An updated analysis around Vir Biotechnology follows in the paragraphs below.

There are no second chances in life, except to feel remorse .”? Carlos Ruiz Zafón.

Today, we put Vir Biotechnology, Inc. ( VIR ) back in the spotlight for the first time since our initial article on this small cap name in March of last year. The stock had a big drop over the summer. However, I have upped my previous " watch item" stake in this small biotech name on that decline via covered call orders. The shares offer solid value at current trading levels, in a large part due to the company's massive cash balance. An updated analysis around Vir Biotechnology follows below.

Company Overview:

This commercial-stage immunology company in headquartered in San Francisco. The firm is focused on developing therapeutic products to treat and prevent serious infectious diseases. The stock currently trades just north of ten bucks a share and sports an approximate market capitalization of just under $1.4 billion.

Vir Biotechnology has one approved Covid-19 therapy in collaboration with GSK plc ( GSK ) that is no longer producing meaningful revenues as the pandemic has ebbed. The upside to this partnership is it provided a huge slug of cash flow to Vir.

Recent Developments:

The stock plunged some 40% in late July last year after Vir Biotechnology announced that Phase its candidate VIR-2482, a monoclonal antibody that was being evaluated in a Phase two trial to prevent influenza A, did not meet its primary endpoint. One secondary endpoint pointed to some value in the potential treatment.

However, even after the setback, the company has numerous other candidates in various phases of development. Its work targeting hepatitis looks particularly promising. In order to lower the company's quarterly cash burn rate in light of the setback with VIR-2482, in December management announced a 12% reduction in its workforce and will close one of its two R&D facilities. These changes are projected to reduce annual cash burn by approximately $40 million.

The company has a couple of promising candidates targeting hepatitis B. The first is VIR-3434. This is a subcutaneously administered monoclonal antibody of mAb that targets hepatitis B virus surface antigens to block entry of all 10 genotypes of HBV into liver cells. The other is VIR-2218. This is a subcutaneously administered HBV-targeting siRNA designed to inhibit the production of HBV proteins, which should in theory enable a more robust T cell and B cell immune response. This is a significant potential opportunity.

Vir Biotechnology has several upcoming catalysts from its pipeline in 2024.

Analyst Commentary & Balance Sheet:

Since third quarter results were posted on November 2nd, seven analyst firms including Needham and Barclays have reissued Buy/Outperform ratings on the stock. Price targets proffered range from $15 to $27 a share, with H.C. Wainwright being the extreme outlier with a $95 price target on VIR.

Just under seven percent of the outstanding float in the shares is currently held short. There were some insider sales in the stock in June when the stock traded in the mid $20s. There has been no insider activity in the equity since. The company ended the third quarter with approximately $1.7 billion in cash and marketable securities on its balance sheet . A few days after the quarter's closed, BARDA awarded Vir Biotechnology with $50 million in additional funding to research antibody therapies targeted at microbes of pandemic potential, including COVID-19. The company carries no long-term debt and had a net loss of $163.4 million in the third quarter.

Verdict:

Despite the recent setback, Vir Biotechnology still has some "shots on goal" within its pipeline. In addition, the stock's current market capitalization is more than $300 million less than Vir's net cash on its balance sheet. Given that I can mitigate that further via covered call trades, this stock seems an excellent candidate for that simple option strategy. The downside being I may leave some " money on the table" should the market eventually bestow any value to the company's pipeline and developmental efforts.

Beauty is one of life’s biggest deceivers .”? L. Starla.

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