Arsanis, Inc. (NASDAQ: ASNS) is a clinical-stage biopharmaceutical company focused on applying monoclonal antibody (mAb) immunotherapies to address serious infectious diseases. Arsanis possesses a deep understanding of the pathogenesis of infection, paired with access to what Arsanis believes to be some of the most advanced mAb discovery techniques and platforms available today. Arsanis’ pipeline is comprised of mAbs targeting multiple serious bacterial and viral pathogens, including a respiratory syncytial virus.
Arsanis is a U.S. company headquartered in Waltham, Massachusetts, with a wholly owned subsidiary that is primarily focused on discovery research in Vienna, Austria (Arsanis Biosciences GmbH).
On November 27th, the company’ shares surged followed by the announcement of a definitive merger agreement, under which X4 Pharmaceuticals is expected to merge with a wholly-owned subsidiary of Arsanis in an all-stock transaction. The merger would result in a combined company operating under the X4 Pharmaceuticals name that will focus on the development and commercialization of X4’s lead product candidate, X4P-001, and the advancement of X4’s pipeline of treatments for rare diseases of the immune system and rare cancers.
X4’s assumed value of $115 million is based on the value of its pipeline, the valuation of its last private round, and also X4’s achievement of various milestones since completing that round.
Transaction Overview:
Michael Gray, president and chief executive officer of Arsanis, said, “Following an extensive review of strategic alternatives, we believe the proposed merger with X4 Pharmaceuticals would provide Arsanis stockholders the opportunity to potentially realize value as X4 continues to execute on its promising new approach to rare disease and cancer therapy via the CXCR4 immune pathway. We are confident that X4’s experienced senior management team will lead the combined company to future success. We are also pleased that X4 has expressed interest in retaining certain members of our clinical development and regulatory staff as well as our scientific team in Vienna, Austria, a team which has deep expertise in the research of virally-mediated infections, as demonstrated by Arsanis’ on-going ASN500 collaboration with the Bill & Melinda Gates Foundation.”
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Before this on Nov 9th, Arsanis reported financial results for the third quarter ended September 30, 2018.
Recent Key Business Developments
- In September 2018, Arsanis nominated the lead development candidate for its ASN500 program. ASN500 targets respiratory syncytial virus (RSV), a virus that afflicts in aggregate over two million young children and elderly and immunocompromised patients annually in the United States and can cause serious respiratory tract infections.
- In August 2018, Arsanis entered into a supplemental $1.1 million grant agreement with the Bill & Melinda Gates Foundation to conduct preclinical development activities for the ASN500 program that were not included in the original February 2017 grant agreement. The Company recognized grant income of $1.1 million during the three and nine months ended September 30, 2018, under this August 2018 grant agreement.
- In August 2018, Arsanis’ board of directors approved a reduction in the workforce to reduce operating costs and better align the company’s workforce with the needs of its business following the discontinuation of ASN100 clinical development.
- The Company anticipates that it will substantially complete the implementation of the reduction in workforce by the end of the fourth quarter of 2018 and estimates that it will incur total expenses of approximately $2.8 million relating to the reduction in workforce, comprised of notice and employee severance and retention payments. Arsanis expects to record these charges during the fourth quarter of 2018 and the first quarter of 2019.
Arsanis’s business risk profile derives substantial strength through the series of positive developments in the recent past, which has been steadily encouraging for the company. Analysts tracking the stock believes that the combined entity has a significant opportunity to build a robust global rare disease franchise targeting more than $1 billion in market potential, spearheaded by X4P-001 and WHIM syndrome. Furthermore, the merger is expected to combine the strengths, provide near-term capital to support ongoing trials and further strengthens the overall team and infrastructure of the combined entity.
Per www.marketbeat.com, Their average twelve-month price target is $18.50, suggesting that the stock has a possible upside of 398.65%. The high price target for ASNS is $27.00, and the low-price target for ASNS is $2.50. There are currently three hold ratings and one buy rating for the stock, resulting in a consensus rating of “Hold.”
About X4 Pharmaceuticals: X4 Pharmaceuticals is developing novel therapeutics designed to improve immune cell trafficking to treat rare diseases and cancer. X4’s oral small molecule drug candidates antagonize the CXCR4 pathway, which plays a central role in immune surveillance. X4’s most advanced product candidate, X4P-001, is in Phase 2 clinical trial in patients with WHIM syndrome, a rare genetic, primary immunodeficiency disease, and is currently under investigation in multiple clinical trials in solid tumors. X4P-001 is expected to begin a Phase 3 trial in WHIM syndrome in the first half of 2019. X4 was founded and is led by a team with deep product development and commercialization expertise, including several former members of the Genzyme leadership team, and is located in Cambridge, MA.
Product Pipeline:
*Two oncology trials have concluded: P1b biomarker in melanoma and P1b in RCC. Final publications expected in 4Q19
Source: Company presentation
ASNS Pipeline:
Synergies and value unlocking due to the merger:
- Leverages X4’s deep experience in rare disease products and its advanced pipeline with Arsanis’ European infrastructure and related scientific research expertise
- Provides near-term capital to support the Phase 3 trial of X4P-001, a potentially disease-modifying treatment for WHIM syndrome, and enable future financing opportunities
- Strengthens the combined team, capabilities and infrastructure
- Enables growth to pursue Arsanis’ strategy of becoming a global commercial business grounded in a rare disease franchise
Earnings Review (In, thousands):
Revenue: To date, Arsanis have not generated any revenue from any sources, including from product sales, and the company does not expect to generate any revenue from the sale of products in the near future.
Profitability: For the third quarter ended September 30, 2018, Arsanis reported a net loss of $10.9 million, or $0.76 loss per share, as compared to a net loss of $11.6 million, or $22.60 loss per share for the third quarter of 2017.
Research and development expenses were $9.6 million for the third quarter of 2018, as compared to $10.6 million for the third quarter of 2017. The decrease of $1.0 million was primarily due to the reduction of $0.9 million in direct costs for Arsanis’ ASN100 program, a decrease of $0.1 million in direct costs for its ASN300 program, and a decrease of $0.2 million in direct costs for its ASN500 program, partially offset by an increase of $0.2 million in unallocated research and development expenses.
General and administrative expenses were $3.3 million for the third quarter of 2018, compared to $2.5 million for the third quarter of 2017. The increase of $0.8 million was primarily related to additional costs associated with operating as a public company, including increases of $0.9 million in personnel costs primarily due to an increase in headcount and employee compensation.
Other income, net was $1.9 million for the third quarter of 2018, compared to $1.5 million of other expense, net for the third quarter of 2017.
Liquidity and financial flexibility: As of September 30, 2018, cash and cash equivalents totaled $40.8 million, with approximately 14.32 million shares of common stock outstanding.
Key risk factors:
Successful completion of the upcoming milestones/Catalysts would lead future direction for the company. Any adversities related to these future milestones might adversely impact the overall investor sentiments.
As with any pre-development stage company, Arsanis has experienced net losses, and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Therefore, to fund operations, it needs to raise money through capital markets and/or private financing.
Arsanis is still an early stage entity and has not yet generated revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it. The company’ prospects are significantly dependent on its flagship projects, which might have limited sales potential initially.
Stock Performance
Comments:
- On Friday, November 30, 2018, ASNS closed at $3.89, on an average volume of 17.4 million shares exchanging hands. Market capitalization is $53.11 million. Current RSI is 72.65
- In the past 52 weeks, shares of ASNS have traded as low as $1.15 and as high as $28.69
- At $3.89, shares of ASNS are trading above its 50-day moving average (MA) at $1.62 and below its 200 days moving average at $9.78
- The present support and resistance levels for the stock are at $2.00 & $5.24 respectively.
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