Roth Capital Partners reiterated its Buy rating and $8 price target on Seelos Therapeutics Inc (NASDAQ:SEEL) in anticipation of new data from the company’s Phase 1 trial of racemic ketamine (SLS-002) as a treatment for suicidal ideation.
The firm said the study represents a “potential blockbuster market opportunity” and laid out several reasons investors should keep an eye on the company ahead of the unblinding of study data in the second quarter.
The study examined the pharmacokinetic (how a drug moves through the body) and pharmacodynamic (the body’s biological response) effects of four doses of intranasal SLS-002.
READ: Seelos' ketamine depression drug on track as company stresses importance of mental health during coronavirus pandemic
Normally this type of data isn’t especially noteworthy, the firm said, but if SLS-002 is able to show comparable pharmacokinetic and pharmacodynamic modeling with lower levels of dissociative effects, Roth believes the drug could be best-in-class for the treatment of acute suicidality in patients with Major Depressive Disorder (MDD).
Seelos reported clean safety data in a preliminary blinded fashion, which Roth said de-risks a significant binary event.
A study of racemic ketamine, the active ingridient in SLS-002, showed compelling reductions in depression scores on the MADRS scale after 24 hours — 44% compared to 6% with a placebo — in patients with treatment-resistant MDD.
The drug’s main competition is Johnson and Johnson’s (NYSE:JNJ) Spravato, an intranasal formulation of esketamine. It was approved by the FDA in March 2019 and has some 5,000 patients on treatment, per the company. That kind of demand is indicative of an even greater need, Roth said.
The company has a market cap of $22.3 million, which shouldn’t dissuade investors, Roth said. The firm pointed to the success of Relmada Therapeutics Inc, which went from a microcap to $602 million.
In addition to SLS-002, the company is developing trehalose (SLS-005) as a treatment for Sanfilippo Syndrome, with a Phase2b/Phase 3 trial on the horizon.
Roth estimates potential peak sales of $1.6 billion for SLS-002, assuming 400,000 US adults admitted to the hospital for acute suicidality, growing 10% per year, and a market launch in 2024.
As of December 2019, the company had $10.3 million in cash, the firm said, not including proceeds of $4.3 million raised on February 13, 2020 and $3.9 million raised on March 16, 2020.
Risk-wise, Roth noted that success in early stage trials doesn’t necessarily guarantee success in later trials. The company also does not yet have any approved products and will have to navigate regulatory hurdles along the way, but the firm believes Seelos is well-positioned for future success.
—A previous version of this story incorrectly stated that a study was conducted with SLS-002, when it was actually done with racemic ketamine, the drug's active ingridient—
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