Canaccord Genuity (TSX:CF, LSE:CF) analysts have repeated a 'Speculative Buy' rating and $1.00 price target on Small Pharma Inc (TSX-V:DMT, OTCQB:DMTTF) after the biotechnology company published its financial results for the year ended February 28, 2022.
They noted that Small Pharma showed a smaller-than-expected net loss of $4.8 million versus their loss estimate of $7 million.
The analysts pointed out that operating cash burn was $5.1 million and the company exited the quarter with $43.2M in cash and restricted cash. Management estimates this is sufficient to fund operations for at least the next year, they added.
READ: Small Pharma publishes year to February 28, 2022 results showing cash on hand of C$40.7M
The analysts noted that top-line results from Small Pharma’s lead programme, SPL026 intravenous DMT-assisted psychotherapy in major depressive disorder (MDD), have been pushed out and that the budget for the combined Phase I/IIa study has also been increased, from $4.8 million to $5.5 million.
“This is offset by a reduction to the Phase IIb trial budget from $25 million to $22.5 million,” the analysts said. “We've updated our R&D (research and development) timelines and spend forecast accordingly, which pushes out the start of the Phase IIb trial from October 2022 to January 2023. Management continues to expect Phase IIb will complete in 2024 so this does not have any impact on our Fall 2027 drug launch timeline.”
The analyst said they believe Small Pharma is sufficiently capitalized to complete SPL026's Phase I/IIa MDD trial, submit clinical trial applications for the two new SPL026 Phase I trials, take SPL028 through Phase I and complete SPL029's preclinical work.
However, they forecast the company will need additional capital to complete the $22.5 million SPL026 Phase IIb trial.
“We believe the optimal time to raise additional funds will be following a positive SPL026 Phase IIa data readout, expected later this year,” the Cannacord analysts added. “Our price target remains unchanged at C$1.00 per share, implying >400% upside potential from current levels. We reiterate our SPEC BUY rating.”
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