First Berlin Equity Research has published a research update on Sernova Corp. (ISIN: CA81732W1041). Analyst Christian Orquera reiterated his BUY rating and maintained his CAD 3.80 price target.
Sernova has published FY 22/23 financial statements and provided a business update. The figures were roughly as expected. The company reported no revenue and EBIT of CAD-39.2m (FBe: CAD-38.8m; FY 21/22: CAD-24.8m). The cash position & other ST investments amounted to CAD19.8m at YE 22/23 (FB: CAD20.0m; YE 21/22: CAD49.8m), which may fund operations into Q4 2024. We anticipate that the company will close a non-dilutive partnering deal in H1 2024 to substantially expand financial leeway. The company’s latest updates at the International Pancreas & Islet Transplant Association (IPITA) congress in San Diego, CA, on 26 October 2023 confirmed encouraging prospects based on development progress achieved with the company’s 1st generation (1G) and 3rd generation (3G) products for type 1 diabetes (T1D). We expect Sernova to provide a further update on the 1G product’s 2nd cohort using the 10-channel Cell Pouch in Q1 2024. Achieving insulin independence in first patients with this larger Cell Pouch without the need for top-up via the portal vein would represent a major milestone and stock catalyst. Moreover, the company’s much larger peer Vertex Pharmaceuticals had to pause the phase 2 study of their 1G programme VX-880 in T1D patients due to the death of two patients until an independent committee and regulators analyse all data. Although these deaths were apparently unrelated to VX-880, it will cost valuable time. Sernova’s 1G hypothyroidism programme is on track to report preclinical data in H1 2024, progress toward an IND filing in H2 2024 and start patient enrolment shortly after. We reiterate our Buy rating and a CAD3.80 price target.