Shares Of KalVista Are Nearing Buy Territory Again

About: KalVista Pharmaceuticals, Inc. (KALV), Includes: BCRX, MRK, XBI
by: Clover Biotech Research

Shares of KalVista have fallen nearly 30% this month due to sector weakness and insider sales (presumably).

KalVista had previously rallied to 52-week highs in absence of any large catalysts.

DME & HAE data loom in late 2019. These events are likely to serve as a turning point in KalVista's story.

I believe both of these events are likely to be positive.

I believe the recent weakness in shares of KALV are deserving of a speculative buy.


Share prices of KalVista (KALV) have recently fallen in light of some weakness amongst the biotechnology sector. The article below will assess KalVista's upcoming prospects in light of its cheaper prices.

Most recent 10-Q

Original conviction article

KalVista's share price surpassed the $30 PT within a few months of the article's creation, reaching as high as $34/share before stabilizing and receding:

Beginning in April, KalVista's momentum most likely fell victim to general biotech weakness, as evidenced by XBI's chart:

In looking for a technical entry, I often look at weekly or monthly charts.

Here is a weekly chart of KALV:

The current weekly candle suggests further downside. However, if KALV is able to then bounce back and end the week on a high note, this may be the "hammer" or "cross" I am looking for.

Capital Structure

17,247,348 shares, priced at $24 = ~$420M market capital

~$110 in cash & investments / no significant debt = ~$310M enterprise value

Cash per share: ~$6.10


We can breakdown KalVista in increments of $6. The ultimate bear case theorizes that all of KalVista's assets, besides cash and investments, are worthless. This values KALV at $6/share. In the event of bad news, one can anticipate KALV's value trading around $12/share. KALV's key moving averages are ~$18/share. Investors need not be concerned if prices are to fall near this level once more. $24/share, $30/share, and so on, can be expected in favorable markets, positive news, or re-evaluations.


Event Timing
DME data 4Q 2019
HAE data 2H 2019
Merck decision regarding DME YE 2019

KalVista's main proposition centers around its treatment for diabetic macular edema [DME]. We've discussed previously why KalVista's phase 1 data & Merck partnership bodes well for phase 2 data, expected in late 2019. KalVista is developing the same mechanism of action for hereditary angioedema as well. We know that BioCryst (BCRX) has had success with the same MOA and can, therefore, anticipate positive data from KalVista when the company updates investors on acute HAE data in late 2019. We will, however, take a closer look at HAE prospects when it nears.

There are reasons to believe KalVista's HAE candidate could provide therapeutic differentiation over BioCryst's. Per Stifel's analyst:

Though very early, PK profile of KVD900 looks superior to HAE asset under development via competitor BCRX. We believe moderate level of efficacy shown for BCX7353 forms foundation of our view KVD900 has a shot at becoming a best-in-class drug in the on-demand HAE setting.

Only in the event of obvious therapeutic differentiation will HAE data be a true catalyst. In the event of positive developments for HAE (not previously accounted for in the original valuation) and DME, one can expect KALV to be priced in excess of $36/share - my new PT. I do anticipate that Merck (MRK), assuming positive phase 2 data, is more likely to acquire KalVista or their DME asset than to simply partner with them.

Insider sales

KalVista has seen a flurry of recent insider sales. This is probably attributable to shares of KALV increasing two- and three-fold in value. So, one can expect investors to take a bit off the table after major run-ups. The CEO, for example, despite recently selling some of his position, still retains the vast majority of his position.

Institutional investors

Two institutions I follow - Ra Capital & Deerfield - are investors of KALV.

Game Plan

Plasma kallikrein inhibitor therapy, pioneered by KalVista, is likely to change the landscape of DME, which is in need of other options. This makes KalVista a very attractive biotech concern.

For those interested in the story, I would recommend a position in KALV at a low cost basis, due to its speculative nature (KalVista is without an asset at or beyond phase 3), when the weekly chart sets up favorably.

In the event KALV reveals positive phase 2 DME data, I would likely add to the position. In the event KALV reveals "bad" DME data, I would likely sell the position.

Disclaimer: The intention of this article is to provide insight, not investment advice. While the information provided in this article is intended to be factual, there is no guarantee and prospect investors are encouraged to do their own fact-checking and research before investing in a company. One must also consider one's own financial standings, risk tolerance, portfolio diversification, etc. before making a decision to buy shares in a company. Many of my articles detail biotechnology companies with little or no revenue. These stocks are, therefore, speculative and volatile. Even when prospects seem promising, there is no predicting the future. Losses incurred may be significant.

Disclosure: I am/we are long KALV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.