ABUS Stock: Arbutus Shares Spike After Court Decision, What’s Next?
Following a decision from the U.S Patent & Trademark Office, shares of Arbutus Biopharma Corp (Nasdaq: ABUS) stock soar over 90%. But with the broader market selling off, what’s next for the biopharma company?
ABUS is in its clinical stage, focusing on developing treatments for hepatitis B (HBV). So far, the company has a strong pipeline of products for HBV and a new therapy for COVID-19.
With this in mind, its biggest claim to fame is its drug delivery technology. In fact, the technology is being used to deliver Moderna’s (Nasdaq: MRNA) COVID-19 vaccine. Yet, the vaccine maker doesn’t believe it should pay royalties for using it.
However, a recent court decision could help Arbutus collect what is owed to them. That said, what’s next for ABUS stock? Let’s check it out.
Why ABUS Stock Is Trending
The recent court ruling in favor of Arbutus can be huge news for the bio firm. For one thing, it means the company’s patents protect its valuable technology. And secondly, it gives ABUS the ability to sue Moderna for royalties.
If the company goes through with the lawsuit, Moderna may need to pay royalties for its COVID-19 vaccine. Nonetheless, the drug delivery system is critical for the vaccine to work properly. In particular, lipid technology helps carry the drugs through the bloodstream, leading to better absorption.
Evidently, investors were happy to hear the news as ABUS stock nearly doubled the day of the decision. Since last week, however, ABUS stock is giving back some of the gains, now +14% in the past five days.
On the other hand, Moderna stock is down over 25% during this time.
How This Affects ABUS Stock
Depending on what happens next, the decision to uphold the patents can provide plenty of upside for Arbutus. For one, it may give them the right to receive a portion of Moderna’s vaccine sales.
Genevant Sciences holds exclusive rights to the lipid nanoparticle technology. With this in mind, Arbutus owns around 16% of the company’s rights to license these patents.
So far, vaccine sales are driving Moderna to new heights. It’s had incredible revenue growth over the past four quarters.
The vaccine is a huge moneymaker for the biotech company. Not only that, but Moderna’s stock is up 130% during this time.
If Arbutus can snag a portion of these sales, it has the potential to boost revenue further. Even a small percent of the vaccine sales will be substantial for the company that relies on licensing as a significant part of its business model.
Analyzing ABUS Stock
The recent ABUS stock news caused a brief rally in share price. But, ABUS shares are fading back to where they were previously. Even more, the stock has struggled all year, down about 8%.
Another key point to consider is that Arbutus is still a clinical-stage company. Meaning the company’s products are still being researched and developed. If the company can gain a royalty stream from vaccine sales, it will give them reliable cash flow to grow.
After all, the company’s main focus is to cure HBV, which affects over 350 million people globally. While this may be true, ABUS stock has been relatively quiet despite the recent jump in share price.
Since last summer, ABUS is trading in a range between $2.5-$5. Following the recent spike in share price, the RSI Index was signaling oversold with readings +70.
Now that prices have cooled off a bit, ABUS stock could be setting up for another run with trading volume increasing. But, this could also be taken as a sign of selling into the rally. Still, with the company progressing on its HBV pipeline and winning royalty rights, it should help its value.
It’s often difficult to value a clinical-stage bio company. But, it’s especially tough when royalties are involved. First, you don’t know how well the market will react to the drug. And, more importantly, how much sales it will generate.
With this in mind, the company is addressing a massive HBV market. So far, the company has four HBV drugs in its pipeline, along with one coronavirus treatment in the works.
The bio firm’s third-quarter earnings show it’s progressing on its pipeline, with its first patient using AB-729 drug in trials. That said, here are the highlights from the report:
- Net Loss of $24.2 million.
- Cash & Equivalents totaling $151 million.
- Operating Expenses reached $16.3, compared to $12 million in Q3 2020.
All in all, the company expects its cash will be able to fund them through Q2 2023.
Is It Time to Buy ABUS Stock?
All things considered, ABUS stock has a big opportunity ahead of it. With its patent holding up in court, the company is looking to sue Moderna for royalties.
Not only that but the global HBV market is set to grow 30% annually, reaching +$35 billion by 2030. If everything goes according to plan, Arbutus should play a critical role in treating the disease. The company is developing a combination of products designed to:
- Reduce surface antigen
- Suppress viral replication
- And boost the immune system.
As the company passes its drugs through the clinical pipeline, we’ll see a clearer picture of how big of a role the company will play. At any rate, the new ruling will help the firm’s long-term prospects. With the CDC extending eligibility for COVID-19 booster shots to everyone, we may see more of Arbutus’s technology being used.
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About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.