Adicet Bio: A First Take

Summary

• Today, we take a look at Adicet Bio for the first time.
• The company is pioneering what it hopes will be among the next wave of CAR-T therapies and is advancing its lead candidate.
• An investment analysis follows in the paragraphs below.
• Looking for a portfolio of ideas like this one? Members of The Busted IPO Forum get exclusive access to our model portfolio. Learn More »

Design Cells

Don't live the same year 75 times and call it a life."― Robin S. Sharma

Today, we put Adicet Bio, Inc. (NASDAQ:ACET) in the spotlight for the first time. The company is on the vanguard of the next wave of CAR-T development. Unfortunately, the lousy sentiment on biotech over the past few years and its slow pace of development has put the shares firmly in Busted IPO territory. A quick analysis on this name follows below.

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Company Overview:

Adicet Bio is a clinical-stage biotech concern based out of Boston. The company is focused on discovering and developing allogeneic gamma delta T cell therapies for cancer and other diseases. The stock currently trades just over $17.00 a share and sports an approximate market capitalization of $700 million.

The company's developmental platform is based on allogeneic gamma delta T cells which have several advantages over the Alpha T cells which spawned the first generation of CAR T therapies. These advantages include durability and safety.

July Company Presentation

These T cells do a better job of specifically targeting cancer cells while avoiding harm to normal tissues and have many potential uses in oncology, particularly solid tumors. Adicet's technology platform can activate and expand gamma delta cells (see process above).

July Company Presentation

Adicet has many candidates in its pipeline as can be seen from the chart below.

July Company Presentation

The firm's pipeline is very early stage at this point and will build out as the company plans to submit one new IND every 12-18 months. The furthest along of these efforts is ADI-001. This is an allogeneic CD20 gamma delta 1 CAR T therapy. ADI-001 is designed to target malignant B cells by leveraging the innate and adaptive receptors found naturally on gamma delta T cells with the added benefit of an engineered anti CD20 CAR. The candidate has shown solid promise in an ongoing study to treat relapsed or refractory B-cell Non-Hodgkin's lymphoma (NHL). This candidate garnered Fast Track Designation for this indication from the FDA in April of this year.

July Company Presentation

The next step for management is to engage the FDA around a pivotal-intent single arm clinical trial that hopefully results in an accelerated approval for ADI-001, provided the data meets/exceeds all criteria. Here are some of the other milestones the company has planned over the next year or so.

July Company Presentation

Analyst Commentary & Balance Sheet:

Since March, eight analyst firms including Jefferies and BTIG have reissued or assigned Buy ratings to the stock. Price targets proffered range from $21.00 to $35.00 a share. The stock has its share of bears given that one out of every four shares outstanding are currently held short. Insiders have been frequent but small sellers of the stock throughout 2022, disposing of just less than $1 million worth of shares in aggregate so far this year. There has been no insider purchases in the equity so far in 2022. The company ended the first quarter with just over $275 million of cash and marketable securities on its balance sheet. Management has stated that is adequate to fund all operations into the second half of 2024.

Verdict:

The problem with Adicet and all CAR-T concerns is the pace of development is always slow. This is especially true with a pipeline that is very early stage. In a bull market, a small "watch item" position in ACET might be warranted as its technology platform appears intriguing.

However, with interest rates much higher than they were a year ago and the country looking like a possible recession is on the horizon, is hardly a nurturing environment for this kind of high beta concern where any potential commercialization is years away. Probably one good reason ACET has such a large short position at the moment.

While the company states it has enough funding in place for the next two years, my guess is they do another capital raise sometime in 2023. The company raised $135 million early in 2021 and nearly $90 million late last year when the funding conditions was much more kind. The company filed the prospectus for a $500 million shelf offering this March. Therefore, until Adicet's pipeline advances further, the company inks a collaboration agreement with a larger player and/or the market environment becomes more conducive to "risk on" small cap concerns, we have no investment recommendation on Adicet at this time.

Fortunate are those who take the first steps."― Paulo Coelho

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum and Insiders Forum.