The psychedelic space in the biotech industry has been challenging, with shares not far off all-time lows amid the recent risk-off sentiment.
Toronto-based Stifel GMP Analyst Andrew Partheniou views this environment as favorable to “long-term investors who can pick among the best candidates at a de-risked entry point.”
“The company has successfully completed the world’s first phase 2a trial with MDMA for AUD. The result could be a treatment with up to 10 years before generic competition, offering more attractive long-term economics.”
— Stifel GMP Analyst Andrew Partheniou
“We highlight AWKN as a pure-play psychedelic company focused on treating addiction with a world-renowned management team including famed Professor David Nutt, a differentiated clinic strategy leveraging the only clinical trial-backed ketamine therapy protocol for Alcohol Use Disorder (KARE) and a de-risked drug development pathway with its lead candidate MDMA for Alcohol Use Disorder (AUD) currently in phase 2,” Partheniou wrote in a March 31, 2022, equity research report initiating coverage on Awakn Life Sciences Corp. (AWKN:NEO; AWKNF:OTCQB).
“At an enterprise value below CA$50 million, we believe shares offer an attractive risk-reward profile with investors receiving its KARE licensing strategy, on-label potential for KARE as well as second generation candidates all for ‘free,’” he added.
Partheniou bases his view on Awakn on a “world-renowned management team” that boasts a Professor Celia Morgan and Professor Ben Sessa, who have both completed world firsts in their ketamine and MDMA clinical trials for AUD. Nutt, meanwhile, is the global expert on substance addiction, leading AWKN’s second generation drug pipeline, while Professor Shaun McNulty brings “a wealth of blue-chip experience to steward these pharmacotherapies through commercialization.”
The second part of Partheniou’s investment thesis involves Awakn leveraging its proprietary KARE protocol to address “a CA$5-6.5 billion market opportunity.” He wrote that Awakn’s evidence-based, ketamine-assisted psychotherapy “differentiates itself from competing clinics” and could “increase adoption rates.”
“Investors also gain free optionality for international KARE licensing opportunities and potential insurance reimbursement following a successful market authorization,” Partheniou wrote.
He notes that the company is taking steps to de-risk its offerings and that CEO Anthony Tennyson has “a long track record mitigating risk.”
“The company has successfully completed the world’s first phase 2a trial with MDMA for AUD. The result could be a treatment with up to 10 years before generic competition, offering more attractive long-term economics,” Partheniou wrote.
Partheniou further sees a valuation re-rating upon market authorization of its KARE protocol as well as from “licensing KARE to expand more rapidly and in an asset-light fashion.”
The following are Partheniou’s key upcoming catalysts for Awakn:
- 2022: Announcing KARE licensing initiatives in North America, U.K., Europe
- Q3/22: KARE entering phase 3 in the U.K.
- Q4/22: MDMA for AUD entering phase 2b in the U.K.
- Q1/23: Identify a lead second-generation drug candidate with robust IP potential
Partheniou arrived at his valuation by using a “sum-of-the-parts analysis with a sales multiple approach for AWKN’s clinic business, applying a 1.5x multiple on our FY24 revenues of CA$22 million. This translates to an approximately 15% contribution to our consolidated company valuation, with MDMA for AUD in a 10-year discounted cashflow model accounting for the balance.”
Stifel GMP initiated coverage of Awakn with a Speculative Buy rating and a CA$8 target price. Awakn shares currently trade at around $0.86.
|Want to be the first to know about interesting Psychedelics and Healthcare Services investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter.||Subscribe|
1) Brian Sylvester wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. They or members of their household own securities of the following companies mentioned in the article: none. They or members of their household are paid by the following companies mentioned in this article: none.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Awakn Life Sciences Corp. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Awakn Life Sciences Corp., a company mentioned in this article. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
6) This article does not constitute medical advice. Officers, employees, and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.
Disclosures for Stifel GMP, AWAKN Life Sciences Corp., March 31, 2022
I, Andrew Partheniou, certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issuers; and I, Andrew Partheniou, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Our European Policy for Managing Research Conflicts of Interest is available at www.stifel.com/institutional/ImportandDisclosures.
Awakn Life Sciences Corp. is a client of Stifel Canada or an affiliate or was a client of Stifel Canada or an affiliate within the past 12 months. Awakn Life Sciences Corp. is provided with investment banking services by Stifel Canada or an affiliate or was provided with investment banking services by Stifel Canada or an affiliate within the past 12 months. Stifel Canada or an affiliate has received compensation for investment banking services from Awakn Life Sciences Corp. in the past 12 months. Stifel Canada or an affiliate expects to receive or intends to seek compensation for investment banking services from Awakn Life Sciences Corp. in the next 3 months. The equity research analyst(s) responsible for the preparation of this report receive(s) compensation based on various factors, including Stifel's overall revenue, which includes investment banking revenue.
The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are as of the date of this publication and are subject to change without notice. These opinions do not constitute a personal recommendation and do not take into account the particular investment objectives, financial situation or needs of individual investors. Employees of Stifel, or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within.
Stifel or any of its affiliates may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis; such transactions may be contrary to recommendations in this report. Past performance should not and cannot be viewed as an indicator of future performance.
Affiliate Disclosures: This report has been prepared by Stifel Nicolaus Canada Incorporated. (“Stifel Canada”), which is authorized and regulated by the Investment Industry Regulatory Organization of Canada (“IIROC”), and also trades under the names “Stifel GMP” and/or “Stifel FirstEnergy”. All relevant disclosures required by regulatory rules (including IIROC)and Stifel Canada’s recommendation statistics and research dissemination policies can be obtained at www.Stifel.com/Research or by calling Stifel Canada’s Compliance Department. Stifel Canada will provide, upon request, a statement of its financial condition and a list of the names of its Directors and senior officers.