Coverage Resumed on Developer of 'Drug Candidate with Blockbuster Potential'
Research Report


André Uddin, an analyst with Mackie Research Capital Corp., shared his thesis for investing in this biotech.

In a Jan. 18 research note, Uddin reported that Mackie Research Capital Corp. is resuming coverage of BELLUS Health Inc. (BLU:TSX; BLUSF:OTCPK) with a Speculative Buy rating and a CA$1 per share target price. The stock currently is trading at around CA$0.41 per share.

BELLUS is developing BLU-5937, "a best-in-class cough drug candidate with blockbuster potential," Uddin noted. He added that chronic cough constitutes a largely unmet medical need, affecting up to 10%, or 27.5 million (27.5M), adults in the United States. Further, no new therapeutics for this condition have successfully come to the market in 50 years. "We believe BELLUS should be able to monetize this asset after Phase 2 trials and recommend investors take advantage of the share price weakness."

Compared to the potential competitors, BLU-5937 should have greater efficacy and minimal to no adverse side effects. Like BLU-5937, Merck's CA$1.25 billion (CA$1.25B) drug candidate MK-7264, for instance, inhibits P2X3 receptors involved in cough and "showed strong efficacy in reducing cough frequency," Uddin described. However, the drug causes taste loss in patients, likely due to MK-7264's partial binding to P2X2/3 receptors. BLU-5937, in contrast, is "carefully designed to selectively bind P2X3 receptors while avoiding P2X2/3 binding."

The analyst purported that "with a potentially superior profile, BLU-5937 could be the leader in this billion-dollar new class of drugs. Head-to-head animal studies between BLU-5937 and MK-7264 have shown BLU-5937 to be as effective in cough suppression without the taste loss side effect."

Also favorable to the BELLUS story are its experienced leadership and 35% insider ownership. Two of the corporation's executives, chairman Dr. Francesco Bellini and CEO Roberto Bellini, have "completed three successful exits: Biochem Pharma ($6B in 2001), Virochem Pharma ($500M in 2009) and FB Health ($45M in 2017)," Uddin indicated. Bellini, BELLUS' CEO since 2009, is primarily focused on creating shareholder value.

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Additional Disclosures

Disclosures from Mackie Research Capital Corp., Bellus Health Inc., Initiating Coverage, Jan. 18, 2018

Relevant disclosures required under IIROC Rule 3400 applicable to companies under coverage discussed in this research report are available on our web site at www.mackieresearch.com.

I, Andre Uddin, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report.

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