Q2 Update; Etrasimod Ph2b Atopic Derm Data in Q4 is the Next Key Catalyst for ARNA
ARNA Target price (12M, US$) 87.00
Forecast Change Quiet Quarter for ARNA; Etrasimod Ph2b Atopic Derm Data Up Next in Q4. ARNA announced Q2 results, highlighting ~$1.3B in cash and investments at quarter-end and reiterating guidance for 2020 operating cash burn of $400-$430M. Key ARNA clinical catalysts remain on track after mgmt announced some incremental delays due to COVID in May; importantly, the Ph3 etrasimod UC program is on track for a top-line readout by yearend 2021 (ELEVATE UC 52 ongoing, ELEVATE UC 12 to initiate in H2’20). Nearer-term, the next key catalyst for ARNA is topline data from the Ph2b ADVISE trial of etrasimod in atopic dermatitis expected in Q4; as discussed in our recent preview note, we continue to see a highly favorable risk/reward skew into the etrasimod AD readout, with market comps suggesting upside of as much as ~$25-40+/sh is possible on convincing Ph2 results, while expectations in the stock for the program seem relatively modest. Other clinical catalysts include Ph1 data for APD418 (pipeline agent for acute heart failure) expected in Q4’20 and olorinab Ph2b (IBS pain) topline data expected in Q1’21; separately, the etrasimod CULTIVATE Ph2b Crohn’s disease trial is ongoing (mgmt continues to evaluate options for topline data release in 2021 after some COVID impact), while planning continues for new etrasimod Ph2 trial initiations in eosinophilic esophagitis and alopecia areata (initiation in 2020 is subject to the pandemic situation in Q3/Q4).
Model Update. We updated our model for Q2 actuals and minor expense run-rate adjustments. 2020 projected EPS is now -$8.89 (vs -$9.59 old).