First Wave BioPharma, Inc. (NASDAQ: FWBI) stock is in a bullish mood after FWBI announced its optimum formulation of adrulipase, its product candidate for treating exocrine pancreatic insufficiency (EPI) associated with cystic fibrosis (CF) and chronic pancreatitis (CP), showed an enhanced enteric microgranule drug delivery profile. That data, plus updated analyst coverage, is energizing the FWBI bulls. The stocks move has been impressive.

Since the announcement, FWBI shares have increased by about 16%, decoupling from market weakness that has sharply decreased biotech company valuations during the past two weeks. Still, while an appreciable gain, the better news is that it could be the precursor of more to come, supported by at least two things. First, FWBI intends to submit an Investigational New Drug (IND) application for a Phase 2 "proof-of-concept" clinical study evaluating the improved formulation to potentially treat specific types of EPI. Second, analysts at Roth Capital just published an update suggesting FWBI stock could soar about 1600% from current levels.

Good For FWBI, Excellent For Investors

The Roth analyst spelled it out well. Its report modeled price valuations based on results from FWBI comparing the optimal adrulipase in vitro administered formulation, SDD04, against eight other adrulipase formulations. The report highlighted data suggesting that SDD04 may offer the best protection against acidic stomach conditions followed by rapid drug release in the small intestine, an important distinction because that's where the drug is expected to mix with food and facilitate the digestion of dietary fat allowing the patient to absorb those nutrients rather than pass them in the stool.

Reformulated, SDD04 has about twice the amount of adrulipase as previous formulations, and, importantly, retained its activity even after 90 minutes under dissolution conditions. More good news is that FWBI is significantly increasing its manufacturing yield, helping to decrease the drug's cost of manufacture. FWBI will present more details from its initiaitves to develop a better adrulipase formulation on October 19 at AAPS 2022. An updated 12-month price target shows Roth Capital is quite bullish on the drug's potential.

In a note to investors yesterday, they released models for sharply higher prices, saying, "We derive our 12-month target price of $25 via a DCF analysis, assuming a 20% discount rate that is applied to all cash flows and the terminal value, which is based on a 5x multiple of our projected 2030 operating income of about $129 million. We base our valuation for FWBI on projected future U.S. sales from adrulipase for the treatment of EPI due to CF and CP, using an initial annual price of about $18,000, a price that is consistent with currently available PERTs. We also model sales of niclosamide in three different GI indications."* (*Roth Capital Partners company note FWBI, October 11, 2022)

Of course, they include risks associated with that bullish commentary, including regulatory uncertainty, changes in the commercial markets, and financing risk. Still, the sum of the parts of the report does point to an FWBI looking like its in its best position ever to create near and long-term shareholder value. 

Making Adrulipase Better

Keep in mind that the energized program adds to data showing adrulipase's impressive treatment potential for EPI associated with CF and CP, which in earlier clinical trials demonstrated an excellent safety profile and a mechanism of action that should enable a therapeutic benefit. While its prior formulation resulted in an inconsistent dispersal of adrulipase in the gastrointestinal tract, this new in vitro formulation shows compelling differences, with the latest in vitro enteric microgranule drug delivery formulation of adrulipase outperforming prior drug versions. 

Notably, data suggest the new formulation's delayed-release profile should protect adrulipase in the stomach and enable it to be delivered to the targeted areas of the GI tract, where it can mix with food in the duodenum to provide its therapeutic effect. FWBI believes the data show that the new formulation of adrulipase will result in consistent coefficient of fat absorption (CFA) values greater than 80%, with 80% and higher as the recognized threshold for achieving therapeutic benefit in patients with EPI associated with CF and CP. There's more good news.

Replacing A 40-Pill Per Day Regiment

Research further indicates that the enhanced adrulipase formulation may significantly decrease the number of pills patients need to take to achieve the desired therapeutic effect. That's a significant advantage, with the pill burden associated with pancreatic enzyme replacement therapy (PERT) as high as 40 capsules per day, creating a substantial challenge to treat EPI due to patient regimen resistance. That advantage alone is more than a critical differentiator for patients; it could help expedite approvals from an FDA sympathetic to patient needs.

Getting that approval is part of an expedited mission, accelerated by FWBI's strategic decision to direct its near-term resources toward filing its IND application and beginning a Phase 2 clinical trial. With that the case, FWBI stock could decouple further from broad weakness in the biotechnology sector, where company stocks of all sizes have been met with a decidedly bearish sentiment.

The Biotech Bulls Always Look For Value

While that may be the overall mood, investors are still seizing on opportunities, including those presented by undervalued companies with treatment solutions that have the potential to become the standard of care. FWBI checks those boxes.

Moreover, with a significantly improved balance sheet, having made significant strides in its clinical development efforts, and advancing a potentially best-in-class treatment option for certain EPI indications, they may be checking many more in the coming weeks. That makes the FWBI value proposition and investment consideration more than attractive; it makes it timely.

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