In a Sept. 17 research note, analyst Jonathan Aschoff reported that ROTH Capital Partners changed its target price to $20 per share from $5 on AzurRx BioPharma Inc. (AZRX:NASDAQ) after its 10 for 1 reverse stock split and its announced acquisition of First Wave Bio, a private company, for $229 million ($229M). AzurRx's current share price is about $3.84.
With the transaction, AzurRx, which develops therapies for gastrointestinal (GI) diseases, will gain one new drug candidate, niclosamide, but with it "several shots on goal," Aschoff noted. Niclosamide could treat five lucrative GI indications: COVID-19 GI infection, ulcerative proctitis/proctosigmoiditis, immune checkpoint inhibitor-associated colitis (ICI-AC), ulcerative colitis and Crohn's disease.
Niclosamide has some significant advantages over approved therapies, Aschoff pointed out. It has a smaller particle size of about 7 micrometers compared to the typical 60 and therefore a greater surface to solvent ratio, resulting in improved dissolution. Also, as shown in preclinical studies, its much higher GI concentration does result in significant systemic absorption. Further, the niclosamide's excellent safety profile means the treatment could be combined with inflammatory bowel disease drugs.
"We expect AzurRx to waste little time furthering development of its newly expanded pipeline," Aschoff wrote.
In the last quarter of this year, the newly formed company is expected to commence two trials of niclosamide, a Phase 1b/2 in ICI-AC and a Phase 2 in ulcerative proctitis. The latter will be an addition to its ongoing Phase 2 trial in COVID-19 GI infection. Thus, by year-end, the biopharma will have three Phase 2 niclosamide programs in progress. (Previously, AzurRx and First Wave Bio had signed a drug agreement regarding niclosamide for COVID-19 GI infection and ICI-AC.)
Next year in H2, the combined biopharma intends to start a Phase 1b/2a niclosamide trial in ulcerative colitis and a little further out in early 2024, a Phase 2a niclosamide trial in Crohn's disease.
Aschoff discussed the $229 million ($229M) deal. He wrote that the acquisition value is far greater than what AzurRx will pay to complete the transaction. Upfront, AzurRx will pay $3M in cash and $4M in common stock. Subsequently, it will make two cash payments: $8M within 45 days of closing and $7M by March 31, 2022. AzurRx will pay First Wave the remaining $207M as certain milestones are achieved, and those payments will consist of at least 75% cash and a maximum 25% stock.
"We view these initial few payments as more than reasonable for full economics on the five additional shots on goal that AzurRx now has with the imminent full acquisition of just one compound," Aschoff added.
When the acquisition closes, AzurRx will rename the company First Wave BioPharma, which will have FWBI as its ticker symbol as of Sept. 23, 2021.
ROTH has a Buy rating on AzurRx.
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Disclosures for ROTH Capital Partners, AzurRx BioPharma, Sept. 17, 2021
Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from AzurRx BioPharma, Inc.
ROTH makes a market in shares of AzurRx BioPharma, Inc. and as such, buys and sells from customers on a principal basis. Shares of AzurRx BioPharma, Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
Not Covered [NC]: ROTH does not publish research or have an opinion about this security.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors.