VECT - VectivBio Could Appeal To A Major Pharma

Summary

• There could be bargains among the biotechs listed in the US.
• VectivBio Holding AG could be a bargain. This biotech develops a treatment that could make a valuable contribution to improving the quality of life of patients with certain bowel disorders.
• VectivBio Holding is on its way to developing a more convenient and beneficial treatment than that of the bigger name Takeda Pharmaceutical.
• Analysts give higher chances of success than failure.

Biotech Stocks are Feeling the Pressure of Market Headwinds, but Some of Them Offer a Good Opportunity to Make Bargains

Headwinds from inflation, restrictive interest rate policy and the economic slowdown feared for 2023 have not spared US biotech stocks either, which have lost a lot of the value with which they started 2022.

As the chart below shows, US biotech stocks' performance is represented by two benchmark indices, iShares Biotechnology ETF ( IBB ) and SPDR S&P Biotech ETF ( XBI ), which have returned -14.1% and -26.70% so far, while the US stock market plunged by 19.68%. The development of the US stock market is represented by the SPDR S&P 500 Trust ETF ( SPY ).

There are many US-listed biotech companies whose market value has not been impacted solely by the broader market factors mentioned above. These are companies whose shares plummeted due to more subjective factors, such as falling short of market expectations for the treatments they had under development.

On the flip side, however, these significantly lower valuations increase the likelihood of finding bargains in US-listed biotech stocks. That means adding to positions in promising biotech companies unless cheap prices are the result of headwinds from non-macro factors.

These are trades that could imply good positioning for a possible strong rebound in the stock price. VectivBio Holding AG ( VECT ) appears to be one of those US-listed biotech companies that could be the subject of these deals.

Currently, this biotech develops a treatment aimed at specific intestinal pathologies that, as evidenced by the premises, can make a valuable contribution to improving the quality of life of patients.

This could lead to a profitable market and potentially attract the attention of a better-known pharmaceutical company that may one day be interested in acquiring VectivBio Holding AG and its related portfolio of treatments.

Given these prospects, buying shares of VectivBio Holding AG at these prices could be a bargain.

VectivBio Holding AG in the Biotechnology Sector

Headquartered in Basel, Switzerland, VectivBio Holding AG is a developer of innovative clinical-stage treatments to be commercialized for serious rare diseases.

Specifically, the company is currently developing apraglutide, a long-acting synthetic peptide analog of glucagon-like peptide-2.

Essentially, apraglutide is an analog of an organic compound of amino acid molecules, the properties of which VectivBio Holding AG intends to use for the treatment of patients with short bowel syndrome-intestinal failure. The company is evaluating this treatment through a phase II clinical trial.

VectivBio Holding AG is also evaluating this treatment in short bowel syndrome patients with the colon in continuity anatomy and this project is in a Phase II clinical trial.

In addition, the portfolio of apraglutide-based development projects includes a Phase II clinical trial that the research team is conducting in patients with steroid-refractory gastrointestinal acute versus host disease.

Short Bowel Syndrome

VectivBio Holding AG currently focuses on short bowel syndrome-intestinal failure and on Colon-in-Continuity.

Short bowel syndrome means that the intestines are shorter than normal and such a condition means that the body cannot absorb sufficient nourishment from the diet.

When this part of the gut fails to fulfill this function, intestinal failure occurs and this condition carries the risk of serious complications manifested by dehydration and malnutrition.

The short bowel can be the result of surgical resection, a congenital defect, or a disease.

Most often, patients with intestinal failure are fed entirely parenterally. In some cases, surgical therapy can be used, which can improve patients' ability to use the gut for nutrition, thus significantly reducing the risk of complications from parenteral nutrition therapy.

However, when the condition is diagnosed as colon-in-continuity, it means that the patient's bowel, although shorter than normal, is still adequate.

Short bowel syndrome affects only a few individuals per million people annually, making it a rare condition.

Steroid-Refractory Gastrointestinal Acute Versus Host Disease

According to this study published by Haematologica in 2018:

"upper gastrointestinal acute graft-versus-host disease (UGI aGvHD) is a clinical syndrome of anorexia, food intolerance, nausea and vomiting, first described by Weisdorf et al. in 1990".

Patients with a steroid-refractory form of gastrointestinal acute graft-versus-host disease present themselves with symptoms that have never responded to corticosteroid-based therapy, or only initially as the symptoms have then recurred with continued treatment.

Acute graft-versus-host disease is a common complication following allogeneic hematopoietic stem cell transplantation, in addition to being a major cause of morbidity and mortality in patients who have received a stem cell transplant.

Allogeneic hematopoietic stem cell transplantation consists of reinfusing hematopoietic stem cells (hematopoiesis involves the production of blood components) from a donor (the healthy person) into a recipient (the sick person).

The subject receiving the reinfusion of hematopoietic stem cells must first be prepared or conditioned by the administration of chemotherapy and/or radiation therapy.

The disease is a rare condition.

Preliminary Clinical Data from the Evaluation of Apraglutide

Last October 2022, VectivBio updated the market with preliminary data from a Phase 2 study evaluating the company's proprietary apraglutide as a potential treatment for adult patients with Short Bowel Syndrome with Intestinal Failure or Colon in Continuity.

In practice, this study aims to assess the effects of once-weekly administration of VectivBio's apraglutide in 9 adult patients with an average age between 46 and 47 years.

The study started in June 2021 in patients with short bowel syndrome with bowel failure or with the colon in continuity.

The effect of therapy is assessed in terms of changes in the small intestine's ability to absorb nutrients and the need for parenteral support.

According to preliminary data from the ongoing study, as of October 7, five of the nine enrolled patients, or approximately 55.6% of the total, had been on treatment for at least six months.

Preliminary data show that VectivBio's apraglutide resulted in a 50% reduction in the support from parenteral nutrition technology and a 47% reduction in the content of parenteral nutrition after 6 months of treatment.

In addition, four of the five patients were designated as clinical responders because these patients were able to reduce the parenteral support by at least 20% and managed to spend at least one day without parenteral support after six months of treatment.

Instead, for a total of nine patients treated for at least three months, the need for parenteral support was reduced to 31% following a three-month period of therapy.

According to Tim Vanuytsel, gastroenterologist and leader of the investigative team of researchers, the preliminary data are very encouraging and provide some sort of clinical evidence that VectivBio's apraglutide improves intestinal absorption and parenteral support dependence in patients with colon in continuity. Among patients with short bowel syndrome with intestinal failure, those with colon in continuity anatomy are in large numbers.

Investigators have great confidence in VectivBio's apraglutide as one of the best treatment options for Short Bowel Syndrome patients with Intestinal Failure, significantly improving the quality of life of these patients who require the support from delivery devices for the provision of essential nutrients and fluids for survival.

Additional data will be announced in the coming months which, if promising, could have a positive impact on the share price if stock market headwinds permit.

Last December, Jefferies began coverage of VectivBio's shares with a buy rating. The analyst believes the company's treatment candidate has the potential to lower reliance on intravenous feeding in many patients with short bowel syndrome.

The analyst cited the incredible efficacy of VectivBio's product candidate over other treatments in development while demonstrating superior efficacy even when compared to Takeda Pharmaceutical Company Limited's ( TAK ) Gattex, the only approved drug for the medical condition to date.

The analyst added that Takeda Pharmaceutical's Gattex requires patients to take the drug daily through injections while it shows a modest improvement in quality of life. While VectivBio's product candidate is given only once a week.

On top of a 60% chance of success, the analyst estimated the achievable peak revenue at $750 million.

In a note on May 4, 2021, with which Bank of America [BofA] Securities began coverage of VectivBio's shares with a buy rating and a price target of $19, the analyst predicted 2025 as the year that VectivBio Holding will launch its product candidate to the market.

However, the BofA analyst predicted a lower sales peak of $390 million in 2034, starting with $25 million in 2025.

The Stock Valuation

VectivBio Holding went public on April 9, 2021, through an initial offering of 7.5 million common shares. Each common share was offered at a price of $17, resulting in approximately $127.5 million in funds that the company managed to collect to sustain the project pipeline. Since then, the company has raised additional funds through the issuance of new common stock.

At the time of writing, a total of 62.73 million shares outstanding were trading at $8.66 each, giving a market cap of $543.58 million.

Shares are trading well above the long-term trend of the 200-day simple moving average of $6.22 and well above the $6.55 mean of the 52-week range of $3.81 to $9.29.

The company is not yet selling any products as it is still in the clinical phase to develop potential future treatments for previously studied gut and gastrointestinal problems, which, while rare, can result in a significant impact on patients' quality of life.

Therefore, apart from the comparisons between the price and the two technical indicators just reported, there are no other benchmarks to assess whether VectivBio Holding shares are expensive or cheap.

For now, it can be concluded that based on the comparisons between the current share price and either the 200-day simple moving average or the midpoint of the 52-week range, VectivBio Holding shares are not low. Nevertheless, they look cheap given the prospects of treating small bowel syndrome with intestinal failure or colon in continuity.

This treatment aims to significantly improve the quality of life of patients affected by a serious bowel disease that forces them to use parenteral nutrition.

Although rare, pathology has a promising market. The only currently approved treatment, Takeda Pharmaceutical's, can be improved in several ways, most notably by enhancing the small intestine's ability to absorb nutrients and reducing the need for parenteral support.

Patients need to take Takeda every day. Instead, based on preliminary results from the Phase II clinical trial, VectivBio Holding's apraglutide appears to enable clinically measurable benefits for patients with just a weekly dose of the drug.

Additionally, VectivBio Holding's product candidate appears to have an advantage over other biotech companies working on a treatment that can compete with Takeda Pharmaceutical.

If VectivBio Holding's apraglutide can revolutionize the treatment of patients with small bowel syndrome to the point where the need for parenteral support is virtually eliminated, then VectivBio Holding's stock already has impressive growth potential.

That could draw the attention of some big drugmakers, and the potential acquirer could offer a purchase price many times higher than the current one.

As of this writing, VectivBio Holding stock has received 4 Strong Buy ratings and 2 Buy ratings for a Strong Buy medium recommendation rating.

Analysts have price targets between $18 and $30, with the $22.50 average point reflecting an upside potential of 159.67% from current levels.

Conclusion

VectivBio Holding AG appears to be well on track in the development of a treatment for patients with short bowel syndrome with intestinal failure and with a condition of the colon in continuity.

The company will release more top-line data in the coming months, but the preliminary data from the second phase of the study show the promise of a treatment that can offer patients a valid option and result in a significant improvement in quality of life.

As of now, this stock could be targeted by one of the biggest names in the pharmaceutical sector, suggesting the presence of impressive growth potential at current price levels.

Based on some comparisons with some metrics, the shares are not low, but they are cheap anyway given the possible scenario for the treatment under development.

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