Innovation is the crucial ingredient for market-beating gains. The innovators of the past decade, including Amazon, Google, and Facebook, have morphed into some of the largest and most dominant companies in the market today.
The biotech space is no different with innovation being the secret sauce to unlocking enormous profits. A recent example is Moderna (MRNA), utilizing its messenger RNA platform to develop a vaccine for COVID-19 in record time.
The co-founder of MRNA, Noubar Afeyan, has an enviable track record of bringing forth innovative companies and selling them off once its core product is proven. Afeyan has successfully sold off five unique companies in the life sciences field and is poised to add to his impressive track record with Rubius Therapeutics (RUBY).
The wonderfully dubbed RUBY is developing its RED Platform for broad treatment across a range of diseases. The initial goal is to position the platform to aid patients with refractory disease (medical term for a disease that will not respond to conventional therapy), including those who have failed the vaunted PD-1 anti-cancer treatment.
RUBY’s lead product is RTX-240, a novel treatment that uses modified red blood cells to activate an immune response in patients to fight off cancer. The process begins with a healthy type O negative donor (universal donor blood type) modified with a lentivirus, to mimic the immune system by stimulating adaptive and innate immune cell agonist pathways. The goal is to increase the number of NK (natural killer) and Cytotoxic CD8+ T cell responses in the patient, which should, in theory, decrease the disease burden and perhaps lead to better clinical outcomes, including remission.
RUBY’s RTX-240 performed adequately in its initial foray of testing on a 16 patient class with a diverse set of solid tumors. The four-patient subsector that indicated stable disease seems promising. The four patients each have a different form of cancer, ranging from non-small cell lung cancer to pancreatic cancer after 3-4 months of treatment.
While initial clinical trial results look promising, an element of caution might be prudent when examining RUBY. The sample size for the trial was tiny and the results would need to be confirmed over additional trials with a much broader patient population. Thus far, the side effect profile is benign with very few mild-grade adverse events. A broader patient population would give investigators a greater sense of the adverse event profile one could expect from the treatment.
Secondary Offering Knocks Back The Equity Advance
The share price of RUBY nearly doubled following the release of the impressive phase one data. However, the excitement for existing shareholders was short-lived, with Ruby’s executive team seizing the opportunity afforded them by the elevated share price to issue a secondary offering of stock into the market.
RUBY is looking to raise $200 million before fees by issuing 6.89 million additional shares at $29 per share. Since the announcement on March 16th, RUBY shares have fallen well below the secondary offering price as the market is having trouble digesting the new share issuance. While frustrating to existing shareholders, the move is a familiar tactic used in biotech to fund additional clinical trials.
What Does Wall Street Think Of RUBY?
Consensus among analysts is a Moderate Buy based on 2 Buy and 2 Hold recommendations. The average analyst price target of $25.50 implies that RUBY shares are almost fully priced at current levels, with almost 4% upside potential from current levels over the next 12 months. (See Rubius Therapeutics stock analysis on TipRanks)
Disclosure: On the date of publication, Alexander Poulos did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
