Initiating Coverage of AXLA Axcella Health is developing drugs based on endogenous metabolic modulators (EMMs), naturally occurring molecules that act as regulators and control mechanisms for metabolic pathways. Its two lead products are AXA1655, in a Phase 2 trial for overt hepatic encephalopathy (OHE), and AXA1125 in a Phase 2b trial for non-alcoholic steatohepatitis (NASH). Additional pipeline developments are expected before year end.Axcella's Products Target Multiple Pathways of Disease The company's EMM products are amino acid compositions in proprietary ratios that act through metabolic pathways. The indications in clinical trials are conditions in which liver disease or injury has starting a cycle of injury, repair, compromised function, and further injury. Axcella's products work through the biological pathways to restore balance and prevent dysfunction.Two Clinical Trials Are In Progress Axcella has begun the Phase 2 EMMPOWER trial testing AXA1655 in overt hepatic encephalopathy (OHE), a condition that results from liver disease. OHE patients have toxic metabolites in the bloodstream that lead to mental and systemic dysfunction. The Phase 2b EMMPACT trial is testing AXA1225 in NASH, a disease in which fat accumulation in the liver leads to inflammation, fibrosis, and effects on multiple organs.Delivery As A Beverage Should Help Adoption and Compliance The company's products are are formulated as powders. They are mixed with a glass of water then consumed two or three times daily. The patients in the target market are likely to be taking other drugs for diabetes and other long-term conditions, making this delivery method easy to add as a first-line therapy or in addition to pills and injectables. We believe this ease of use will help adoption and market penetration.Conclusion: We expect AXLA to be driven by progress from its clinical trials and advances in its pipeline products. Our price target is based on our 2027 EPS estimate of $1.95 per share, discounted at 35% per year, with a 15X multiple. Read More >>