x min read

Akari Therapeutics PLC (ADR)(NASDAQ: AKTX) Is A Smart Money Play

Akari Therapeutics PLC (ADR)(NASDAQ: AKTX) Is A Smart Money Play
Written by
Jarrod Wesson
Published on
April 25, 2017
Copy URL
Share on LinkedIn
Share on Reddit
Share on Twitter/X
Share on Facebook

Like the Motley Fool website did, we also took a look at the recent spikes of the common stock price of Akari Therapeutics PLC (ADR) (NASDAQ: AKTX), which has returned more than 150% since the beginning of April, 2017. The clinical-stage biopharmaceutical company, which is focusing on research inhibitors of early mediators of acute and chronic inflammation, communicated that its drug candidate, Coversin, had passed the phase 2 trial. Additionally, the company communicated that the phase 3 clinical will begin in Q4, 2017. In this article, we will provide you more detailed information about this candidate and the other two that the company is testing. But, first of all, take a look at the returns obtained by traders subscribed to news alerts, from $6 the share price went to $17.85. SourceCompany and Drug CandidatesAkari Therapeutics was founded in England on October 7, 2004. The company changed its name several times, and completed several reverse-mergers and acquisitions until it was finally called Akari Therapeutics, PLC on September 18, 2015. Investors can find more information in the annual report filed on the SEC's website. The company explains its research in the following way:

"Akari’s development pipeline is focused on inhibitors of early mediators of acute and chronic inflammation, specifically the complement system, the eicosanoid system and the bioamine system. Each of these systems have either proven or scientifically well-supported causative roles in the diseases being targeted by Akari. Akari believes that blocking early mediators of inflammation will prevent initiation and continual amplification of the processes that cause certain diseases." Source

As mentioned, the company owns the rights of the drug Coversin, which will try to pass Phase 3 soon. But, the company has some other candidates in the pipeline in Phase 1 and in preclinical phase that investors should not forget. We will show later that the company's balance sheet is quite clean. Hence, the company will have time to develop these other candidates if Coversin does not finally work out. The following figure shows all these drugs under development:SourceCoversin - Is the market overreacting?Honestly, the market reaction to the Phase 3 trial approval has been quite surprising. Hence, we believe that it was necessary to bring to light the potential revenues of Coversin. We found the following in the annual report:

"Coversin™. If approved, we would expect Coversin to compete in the market for PNH and aHUS treatment with Soliris®, (eculizumab) which was developed by Alexion Pharmaceuticals. Eculizumab is the first and only therapy approved for PNH, is marketed by Alexion and had sales of approximately $2.8 billion in 2016. Clinicians, nurses and patient groups contacted by us believe that theability to self-administer Coversin as a fixed-dose daily subcutaneous injection will be an attractive alternative therapy." Source

Let's say that the maximum revenue is $2.8 billion, which is the revenue obtained by another competitor, Alexion Pharmaceuticals. This company is much bigger than Akari Therapeutics, so it is difficult to compare the two. However, looking at the EV/Revenue of its competitor, we can get a good estimate of the potential market capitalization of Akari if the drug candidate is successful. This financial ratio is approximately 9x. Hence, a company that generates $2.8 billion in sales distributing a drug such as Coversin may have an enterprise value of about $25 billion. We are not counting here that Akari has some debt. But, it does not matter, this is only a test to check if the share price is not absurd and, well, it is not. The Phase 3 trial was not yet approved, but if the company can commercialize Coversin, the share price will jump much more. So, investors do not have to be afraid of the recent spikes, everything seems to as it should be.Balance SheetHave a look at the assets reported by the company and note the $34 million standing in the balance sheet as well as the small amount reported as patents and intangible:December 31,2016December 31,2015AssetsCurrent Assets:Cash and cash equivalents$34,098,812$68,919,995Short-term investments10,021,963-Prepaid expenses and other current assets1,513,006728,126Receivable from related party-10,366Total Current Assets45,633,78169,658,487Restricted cash142,168142,079Property and equipment, net58,36440,513Patent acquisition costs, net39,36552,483Total Assets$45,873,678$69,893,562SourceNow, look at the liabilities of the company. The most remarkable line is the current liabilities related to options and warrants. These are securities that will have to be paid in 2017. We don't see any problem here, given the large amount of cash on the balance sheet.Current Liabilities:Accounts payable$2,214,313$4,320,588Accrued expenses1,837,647408,222 Liabilities related to options and warrants7,662,80816,396,158Total Current Liabilities11,714,76821,124,968Other long-term liability56,36049,069Total liabilities11,771,12821,174,037SourceInstitutional Investors and InsidersThere is a remarkable amount of hedge fund money invested in this company. These are funds specializing in pharmaceutical companies and who understand the biotech business. Thus, we appreciate seeing that they have invested here as it means that doctors, researchers, and academics believe in the company's drugs:Deerfield Management1,150,700Dec 31, 20169.77%8,100,928Vivo Capital, LLC527,842Dec 31, 20164.48%3,716,007Baker Brothers Advisors, LLC496,901Dec 31, 20164.22%3,498,183NEA Management Company, LLC452,167Dec 31, 20163.84%3,183,255VHCP Management II, LLC369,490Dec 31, 20163.14%2,601,209QVT Financial LP258,121Dec 31, 20162.19%1,817,171SourceAnother remarkable fact is that the insiders have not yet reported sales in April. They obtained large amount of shares in 2015, when the company was still in Phase 2, and we believe that they have faith in the next trial:


Purchase at $0.19 - $0.19 per share.Direct201,000Sep 18, 20151,055,600


Statement of OwnershipIndirectSep 18, 2015722,345,600


Statement of OwnershipDirectSep 18, 2015722,345,600


Statement of OwnershipIndirectSep 18, 2015722,345,600


Statement of OwnershipDirectSep 18, 20150


Statement of OwnershipIndirectSep 18, 2015722,345,600SourceConclusionAkari Therapeutics seems to be an extremely well-followed stock at the moment. The recent news about the company's drug, Coversin, made traders extremely excited about this company and they pushed the price to surprising levels. We made our own due diligence and concluded that the market is not overpricing Akari, since other competitors trade at much higher valuations. Additionally, we appreciate that some hedge funds believe in the company's future and that no insider has sold any shares yet. To sum up, try to keep yourself informed about AKTX, as it may deliver big news very soon. We will be updating our subscribers as soon as we know more. For the latest updates on AKTX, sign up below!Disclosure: We have no position in AKTX and have not been compensated for this article.

Discover Hidden Gems

Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.