On Tuesday, H.C. Wainwright sustained its Buy rating and $10.00 stock price target for Savara Inc. (NASDAQ:SVRA), a biopharmaceutical company. The firm's stance comes amid the evaluation of Savara's Molbreevi (molgramostim) for the treatment of autoimmune pulmonary alveolar proteinosis (aPAP), a rare lung disease.
Savara has identified approximately 3,600 diagnosed cases of aPAP in the United States, with an additional 3,700 individuals potentially undiagnosed. With management's pricing strategy suggesting an annual cost of $300,000 to $500,000 per patient, Molbreevi represents a significant market opportunity based on the currently diagnosed patient population.
Despite the potential, H.C. Wainwright's valuation estimates the opportunity for Molbreevi at about $400 million, assuming the lower end of the pricing spectrum at $300,000 per patient. This adjustment reflects the firm's perspective on the drug's clinical benefit as evidenced in the IMPALA-2 trial, which showed improvements in lung function but questioned whether the results justify the highest proposed price.
The trial indicated a 6% improvement in diffusing capacity of the lungs for carbon monoxide (DLCO) at 24 weeks and a 6.9% improvement at 48 weeks compared to a placebo. While these results are statistically significant and above the 5% improvement threshold deemed meaningful by the management, H.C. Wainwright suggests that an improvement under 10% may not support a $500,000 price tag.
Furthermore, the firm expressed skepticism regarding the projected growth trajectory for Molbreevi post-approval. Concerns were raised about the feasibility of achieving the company's goal of treating 1,000 patients at launch. Key opinion leaders (KOLs) consulted by H.C. Wainwright indicated that some patients are currently receiving off-label treatments with inhaled GM-CSF and may not transition to Molbreevi, especially if it is priced steeply.
In conclusion, while payors appear supportive of the drug's pricing range, H.C. Wainwright maintains a cautious outlook on the $500 million market opportunity initially projected by Savara's management for Molbreevi in the U.S. The firm reiterates its Buy rating and a $10.00 price target on Savara shares.
In other recent news, Savara Inc. reported earnings per share at ($0.12), slightly below the ($0.10) forecasted by Oppenheimer and consensus estimates. Despite this, Oppenheimer maintained its Outperform rating on Savara, emphasizing the company's clinical progress.
The firm's confidence in Savara is bolstered by the prospects of Molbreevi, a potential treatment for autoimmune Pulmonary Alveolar Proteinosis (aPAP), a rare lung condition. The Phase 3 IMPALA-2 trial results for Molbreevi demonstrated a significant improvement in lung function, exceeding initial expectations.
Savara also announced a $100 million stock offering of 26,246,720 shares, managed by firms such as Jefferies, Piper Sandler, and Guggenheim Securities. The company recently appointed Braden Parker as the new Chief Commercial Officer, bringing over 25 years of experience in the healthcare and biotech industry. Savara is also working towards submitting a Biologics License Application for molgramostim, another potential treatment for aPAP, to the FDA in the first half of 2025.
In other developments, Savara launched an Expanded Access Program for molgramostim, targeting aPAP patients. The company also presented its latest clinical findings at the European Respiratory Society Congress, showcasing research on an inhaled treatment for aPAP. These recent developments underscore Savara's ongoing commitment to addressing the unmet needs of patients with rare respiratory diseases.
InvestingPro Insights
Savara Inc.'s financial position presents a mixed picture, according to recent InvestingPro data. The company's market capitalization stands at $698.73 million, reflecting investor interest despite current challenges. InvestingPro Tips highlight that Savara holds more cash than debt on its balance sheet and has liquid assets exceeding short-term obligations, which could provide financial flexibility as it pursues the development and potential launch of Molbreevi.
However, the company's financial health shows some areas of concern. Savara is not profitable over the last twelve months, with a negative gross profit of $45.63 million and an adjusted operating income of -$80.54 million. This aligns with the InvestingPro Tip indicating that analysts do not anticipate the company will be profitable this year, which is consistent with the developmental stage of its key product, Molbreevi.
The stock's valuation metrics, such as the Price to Book ratio of 6.86, suggest that investors are pricing in significant future growth potential, possibly related to the market opportunity for Molbreevi discussed in the article. However, this high valuation multiple, combined with the InvestingPro Tip that net income is expected to drop this year, underscores the speculative nature of the investment at current levels.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights, with 5 more tips available for Savara Inc. These additional tips could provide valuable context for understanding the company's financial outlook and market position as it approaches potential regulatory milestones for Molbreevi.
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