Investment Case On ProQR Therapeutics Gets More Enticing
Summary
- Today, we revisit ProQR Therapeutics, an intriguing developmental concern for the first time since early this year.
- The company recently inked a significant collaboration deal with drug giant Eli Lilly which makes its investment case more enticing.
- We update the investment thesis on ProQR Therapeutics to account for recent events in the paragraphs below.
- I do much more than just articles at The Busted IPO Forum: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
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Life corrects the errors of logic.” - Marty Rubin
The last time we posted an in-depth piece on ProQR Therapeutics (NASDAQ:PRQR) was in March of this year, more than six months ago. We stated it was a 'pound the table' type of bargain at just under $5.00 a share. The stock is since up nearly 75% and recently announced a collaboration deal with a giant drug maker that enhances its investment case. We update our analysis on PRQR below.
Company Overview:
ProQR is headquartered in the Netherlands but has a U.S. campus in Cambridge, Mass. This developmental concern is focused on the development of RNA therapies for inherited retinal diseases or IRDs. These IRDs can cause vision loss and blindness, and the vast majority of these disorders currently have no treatment options. With the recent rally in the stock, the shares trade over $8.00 a share and sports an approximate market capitalization of $540 million.
Recent Events:
The big news that came out around ProQR Therapeutics that triggered the substantial rally in the shares occurred early in September. On the 8th of that month, ProQR Therapeutics announced it had entered into a collaboration agreement with drug giant Eli Lilly (LLY). The focus of the deal is to discover new medicines for genetic disorders in the liver and nervous system using ProQR’s proprietary Axiomer RNA editing platform. This technology enables the editing of single nucleotides in RNA in a highly targeted and specific manner. This deal is a nice confirmation of the potential of this platform. This agreement is designed to help advance potentially five new drug targets toward clinical development and commercialization.
As part of this transaction, Eli Lilly provided the company with a $20 million upfront payment and also took a $30 million equity stake in ProQR as well. In addition, ProQR is also eligible to receive up to just over $1.2 billion for development, regulatory and commercialization milestones around the five targets including in this agreement, as well as tiered royalties of up to mid-single digit percentage on any commercialized sales.
Then, a few days ago, Editas Medicine (EDIT) disclosed early-stage data for its gene-editing candidate EDIT-101 in patients with Leber congenital amaurosis 10 (LCA10). Morgan Stanley called the data set 'inconclusive' which helped trigger a large sell-off in the stock of EDIT.
This news helped the stock of ProQR Therapeutics as it has a rival candidate for this indication called sepofarsen. This compound is currently undergoing a pivotal Phase 2/3 study called Illuminate. We should see topline data from this study sometime in the first half of next year. 36 individuals including eight children are participating in this trial.
In addition, enrollment is also underway in the Phase 2/3 Brighten trial to evaluate sepofarsen in LCA10. Vision loss from LCA10 is due to a specific mutation in the CEP290 gene. Sepofarsen works by binding to the mutated CEP290 RNA to enable correct splicing. The cells in the retina can then produce the CEP290 protein again. 15 children are participating in the Brighten study.
LCA10 is the most common genetic cause of childhood blindness and this rare disease impacts approximately 15,000 people in the Western world.
Sepofarsen has received the following designation from U.S. and European authorities.
- FDA orphan drug designation
- EMA orphan drug designation
- FDA fast track designation
- EMA PRIME designation
- FDA rare pediatric disease designation
In addition to advancing sepofarsen, the company is also working to do the same with a compound called QR-421a. This candidate is an investigational RNA therapy that aims to stop vision loss in people with retinitis pigmentosa or RP as well as Usher syndrome due to mutations in a specific part of the USH2A gene, called exon 13. QR-421a works by binding to the mutated USH2A RNA and by excluding exon 13 from the RNA.
The company is in the planning stages in initialing two final-stage Phase 2/3 clinical studies. These studies should kick off by end of 2021. Positive results from a Phase 1/2 trial for QR-421a in adults with Usher syndrome and non-syndromic retinitis pigmentosa came out in late March. This positive data triggered Citigroup to reiterate their Buy rating and lift their price target on PRQR from $33 to $44.
QR-421a has earned the following designations in Europe and the United States.
- FDA orphan drug designation
- EMA orphan drug designation
- FDA fast track designation
- FDA rare pediatric disease designation
Analyst Commentary & Balance Sheet:
The agreement with Eli Lilly triggered a rash of analyst firm activity this month. Evercore ISI and JMP Securities were two of the four analyst firms that have reissued Buy ratings since the announcement of the collaboration deal. Price targets proffered within those ratings range from $17 to $31, all more than twice the current trading levels of the stock.
The company ended the first half of 2021 with just under €140 million in cash and marketable securities on its balance sheet after posting a net loss of €15.8 million for the second quarter. Add in the $20 million from the Eli Lilly arrangement and the company is well funded at the moment.
The company also has a couple of other candidates (QR-1123 and QR-504a) in earlier stages of development and are not germane to this analysis.
Verdict:
Even after the nice rise in the stock, we are still enthusiastic about the longer-term prospects of this company and continue to hold the stock. With trials for QR-421a set to kick off in the coming months and with key topline data for sepofarsen in late-stage trials out in the first half of 2022, there are potentially positive trial milestones on the horizon. Encouraging analyst support, a strong balance sheet and the new partnership with Eli Lilly are other positives around the investment case for ProQR Therapeutics.
Intelligence is to spot paradoxes. Wisdom is to live by them.” - Raheel Farooq
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum
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Analyst’s Disclosure: I/we have a beneficial long position in the shares of PRQR either through stock ownership, options, or other derivatives. 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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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