Gauging Applied Genetic’s Risk Factors

Clinical-stage biotechnology company Applied Genetic Technologies (AGTC) is focused on developing genetic therapies for treating rare and debilitating ophthalmic, otologic and central nervous system (CNS) diseases.

Clinical-stage companies can take substantial time to reach the product commercialization stage, and any setback during drug development poses risk to investors.

Let’s have a look at AGTC’s recent financials, as well as what has changed in its key risk factors that investors should know. (See Insiders’ Hot Stocks on TipRanks)

AGTC has ongoing clinical trials in X-linked retinitis pigmentosa (XLRP), and achromatopsia (ACHM). Data from these trials have shown evidence of clinical activity and tolerability. Multiple data readouts are expected in 2021 and 2022.

Sue Washer, president and CEO of AGTC, remarked, “We expect the next 12 months to be a catalyst-rich period as we prepare for data readouts in the XLRP and ACHM programs, additional clinical data from our partnered optogenetics program and the advancement of one or more of our preclinical programs towards a potential IND filing.”

Further, the company also has three preclinical programs. One additional ophthalmology program is targeted for the dry form of age-related macular degeneration (AMD) and two CNS programs are targeted to address frontotemporal dementia (FTD) and amyotrophic lateral sclerosis (ALS).

Being a clinical-stage company AGTC’s present revenue comes from licensing fees. In Q4 it generated $0.5 million in revenue. In the comparable year-ago period, the company did not have any revenue.

Total operating expenses remained flat at $14.3 million as compared to $14.6 million a year ago. An increase in the number of outstanding shares helped AGTC report a narrower net loss per share of $0.28, as compared to a net loss per share of $0.56 a year ago.

On September 24, H.C. Wainwright analyst Joseph Pantginis reiterated a Buy rating on the stock with a price target of $24.

Pantginis commented, “Exciting developments are coming from the company’s preclinical pipeline. We see multiple assets emerging and well-positioned to leverage AGTC’s now clinically validated platform, vector selection/preclinical validation process and the accumulated experience in conducting clinical studies.”

Based on 3 unanimous Buys, consensus on the Street is a Strong Buy. The average Applied Genetic Tech price target of $14.33 implies 426.8% potential upside for the stock.

Risk Factors

According to the new TipRanks Risk Factors tool, AGTC’s main risk category is Tech & Innovation, accounting for 37% of the total 62 risks identified. In its recent annual report, the company has changed seven key risk factors.

Let’s delve into these changes which are under Finance & Corporate, Tech & Innovation, Production and Macro & Political risk categories.

AGTC noted that its stockholders could see an additional dilution of ownership, and a fall in stock price, owing to future sales and issuances of the company’s common stock or rights to purchase common stock, which also includes exercises of outstanding warrants and equity incentive plans.

If the company fails to maintain effective internal controls over financial reporting, then there may be a delay in compliance with reporting obligations.

AGTC is developing gene therapy product candidates on novel technology. This makes the prediction of the expected timeline and cost of development as well as gaining regulatory approval difficult.

The regulatory framework to evaluate these products is still evolving, and the approval process can be longer than what AGTC would have expected for orphan ophthalmology product candidates. Any delay or failure to obtain product approval could lower AGTC’s potential product revenue.

Changes in the U.S. patent law could lower the value of AGTC’s patents and affect its ability to protect its products. Additionally, third parties may allege intellectual property infringement, including claims to AGTC’s XLRP product candidates.

AGTC uses a professional human resource service organization, Insperity. If Insperity fails to comply with applicable laws or obligations then AGTC’s relations with its employees could be affected and AGTC could incur substantial liabilities.

Lastly, the COVID-19 pandemic could significantly affect AGTC’s ability to conduct clinical trials, and engage with its third-party vendors.

Compared to a sector average Tech & Innovation risk factor of 26%, AGTC’s is at 37%.

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