Unity Biotechnology (UBX): Stock Consolidation Following Positive Trial Results

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Like death and taxes, aging is inevitable, but some biotech companies are looking to change that. Biotechnology Unit (NASDAQ:UBX), of San Francisco, USA, is developing treatments for diseases of aging, targeting ophthalmic and neurological diseases to leverage partnerships in areas of high unmet need.

The anti-aging market is a relatively new but rapidly growing field that is rapidly becoming a multi-billion dollar industry. Funding for the US National Institute on Aging has grown to $3.9 billion and has requested to increase to more than $4 billion in 2023. This interest is a result of changing demographics: particularly in the West, the global population is ageing. By 2040, it is estimated that there could be 81 million Americans over the age of 65, up from about 57.8 million today. And the aging of the population is accompanied by an increase in diseases such as heart disease, osteoporosis, ophthalmic disorders and diabetes. Several new companies have emerged with the aim of treating or even reversing the conditions of aging and have received the support of high profile billionaires; companies such as Altos Labs, formed in part with Russian billionaire Yuri Milner, and Google’s Larry Page Calico Labs. Another prominent investor in these industries, including Unity Biotechnology, is Jeff Bezos.

Unity has faced some challenges over the past few years. In 2020, they cut 30% of their workforce after a major failure in a phase II trial, for a compound intended to treat osteoporosis. Sold as a rationalization process, restructuring highlights the risks that start-ups face. Although they have the backing of Silicon Valley and are surrounded by bold claims, they have yet to manage to pass ruthless clinical trials that can quickly dash hopes of success.

See value in the pipeline

Unity Biotechnology has several products in development, but the most developed are focused on ophthalmology for conditions such as diabetic macular edema, diabetic retinopathy and age-related macular degeneration. Diabetic retinopathy affects up to 40% of patients with type 2 diabetes in the United States, of which up to 8% of cases can be sight threatening and include diabetic macular edema. The market for related conditions such as diabetic macular edema is estimated to reach $11.1 billion by 2031. Most current treatments are small molecules targeting well-established molecular pathways, such as VEGF inhibitors, which are among the most common treatments and are major drivers of market size.

Unity Biotechnology aims to follow a different strategy of targeting a process called senescence, or the deterioration of cells with age. Senescence has been linked to many diseases of aging, including ophthalmic conditions. Aging senescent cells are thought to interfere with the functioning of surrounding cells and may lead to disease progression; Targeted treatment of these senescent cells is an area of ​​growing interest to slow, if not reverse, the signs of aging.

Unity Biotechnology’s lead compound is UBX1325, which targets a protein necessary for the survival of senescent cells. Results from the Phase II proof-of-concept BEHOLD trial of UBX1325 for diabetic macular edema showed improved visual acuity at 12 and 18 weeks compared to the sham treatment. Unity Biotechnology also recently announced the completion of enrollment for the ENVISION trial. Student UBX1325 in the treatment of wet age-related macular degeneration, ENVISION has an expected completion date of January 2023; results are expected to be available in the first and second quarters of 2023. Successful completion of these trials would be a good step towards approving a product for these important conditions. However, if these trials fail, Unity Biotechnology will find itself in a difficult position, with its other compounds years away from generating revenue.

finance

The latest quarterly results reported licensing revenue of $236,000 in the three months to June 2022, compared to none in the three months to June 2021. This was accompanied by a decrease in operating expenses ($17 million vs. $12.4 million) and a lower net loss ($17.8 million). compared to $13.1 million) during the same period. These improvements resulted in an improvement in net loss per share from $0.32 to $0.19 between the three months to June 2021 and the three months to June 2022.

Their long-term debt commitments stood at $12.6 million in June 2022, up from $18.4 million in December 2021. This suggests they are managing their debt well and have not taken on additional loans. excessive. Their leverage ratio stands at 0.59x, suggesting that they are not overly debt funded. Additionally, the debt-to-equity ratio is currently 1.44x, while their long-term debt-to-equity ratio is 0.32x. All of this suggests a relatively healthy level of leverage for the company, which is refreshing for a biotech company at this point.

Cash, cash equivalents and marketable securities totaled $64.5 million in June 2022, compared to $79.2 million in March 2022. Their quarterly results indicate that they are confident this will be enough for them for the first quarter. from 2023; their gross and net burn rates are 1.56 and 1.59 quarters, respectively, which is in line with their forecast.

Unity announced plans in August for a $25 million common stock public offering to fund further clinical development of UBX1325. The success of this approach will depend on the success of subsequent clinical trials, but so far Unity Biotechnology seems relatively cautious with its approach to debt.

Most recently, Unity Biotechnology announced confirmation of a 10-to-1 reverse stock split which became effective on the 19e October. This was to ensure they remained above the minimum price required for continued listing on the NADAQ Global Select Market and raised their price to around $3 at the time of writing.

Data from their latest quarterly results showed 69 million shares outstanding; the 10-to-1 split means they should be left with around 6.9 million. The split, while increasing the individual share price, is not expected to affect their overall market capitalization, which stands at approximately $45 million.

Stock splits are generally not considered a good sign, especially for companies that have had consistent losses and may struggle to keep their price high. However, Unity Biotechnology is a start-up that still hopes to get a product approved and overall seems on track for revenue growth. It doesn’t have to be a full stop, but it is something to consider.

Researching Quantitative Alpha Ratings gives the company a Hold rating of 2.81, while Wall Street assigns it a Strong Buy at 4.66. They also recently received a strong buy recommendation from Zacks, and Citigroup also recently raised its forecast target to $8 (rated before the reverse stock split) with a buy rating.

The success of biotechnology companies depends on the approval of a product. However, positive clinical data results and further results expected next year are good news. During a period of global market depression, investing in a small biotech without an approved product may be too risky for some, especially those who have experienced a stock split. However, Unity Biotechnology is an interesting company that looks well positioned to capitalize on a growing market. Its finances appear healthy and their products are progressing through clinical development.

This company represents a speculative investment, some would say risky. However, for those looking for an alternative opportunity, this might be an opportunity to consider with caution.

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