NEW YORK - Whitefort Capital Management LP, the second-largest shareholder of Arbutus Biopharma Corp. (NASDAQ: NASDAQ:ABUS), has publicly urged the biopharmaceutical company to stop issuing shares to preserve the value of its patent infringement claims against Moderna (NASDAQ:MRNA) Inc. and Pfizer Inc (NYSE:PFE)./BioNTech SE.
The investment firm, which owns approximately 6.8% of Arbutus, also called for a strategic review of the company's Hepatitis B Virus (HBV) portfolio by the end of 2024.
Whitefort Capital highlighted the significance of the recent U.S. District Court for the District of Delaware's favorable claim construction order for Arbutus in its litigation against Moderna, related to lipid nanoparticle (LNP) delivery technology patents allegedly used in Moderna's Spikevax COVID vaccine. The firm suggests that this ruling also strengthens Arbutus' position in a similar case against Pfizer and BioNTech (NASDAQ:BNTX) concerning their COMIRNATY COVID vaccine.
The investment firm believes that the value of Arbutus' share of potential patent infringement claims could be worth billions, considering the approximately $140 billion in combined global sales of the two vaccines through the end of 2023.
Arbutus is entitled to a 20% gross royalty from any infringement actions after litigation expenses, based on its joint venture in Genevant, which holds the exclusive license to the LNP patents.
Ahead of Arbutus' Annual General and Special Meeting scheduled for May 22, 2024, Whitefort expressed its intention to vote against the proposed increase of share authorization under the company's incentive plan, citing the need to avoid further shareholder dilution.
Furthermore, Whitefort Capital has advised Arbutus to consider strategic partnerships for its HBV pipeline, drawing parallels with similar deals in the industry, such as Arrowhead Pharmaceuticals (NASDAQ:ARWR) Inc.'s collaboration with Janssen Pharmaceuticals. The investment firm suggests that a partnership with a larger biopharmaceutical company could maximize the probability of success for Arbutus' HBV program.
The information in this article is based on a press release statement from Whitefort Capital Management LP.
InvestingPro Insights
As Arbutus Biopharma Corp. navigates through litigation and strategic reviews, investors are closely monitoring the company's financial health and market performance. According to InvestingPro, Arbutus holds more cash than debt on its balance sheet, which is a positive sign for the company's financial stability. Moreover, Arbutus has liquid assets that exceed its short-term obligations, providing some cushion for operational needs in the near term.
Still, the financial metrics reflect some challenges. Arbutus has a market cap of approximately $545.39 million, yet it is grappling with a significant sales decline, with revenue dropping by 60.8% over the last twelve months as of Q1 2024. This decline is further underscored by a quarterly revenue drop of 77.09% in Q1 2024.
The company's gross profit margins have suffered as well, with a gross profit of -$57.84 million and a margin of -445.42% over the same period. These figures highlight the importance of the ongoing patent litigation and potential strategic partnerships in bolstering Arbutus' financial prospects.
Investors should also note the volatility in Arbutus' stock price, which has seen a large uptick of 55.38% over the last six months. Despite this, analysts have concerns, as they do not anticipate the company will be profitable this year and are wary of the high revenue valuation multiple.
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