Solid Biosciences: Keep Your Eyes On The Prize Says Top Analyst

Solid Biosciences (SLDB) has reported weaker-than-expected 1Q20 results, with FY GAAP EPS of -$2.91 missing Street consensus by $0.09. However the update for the SGT-001 phase I/II clinical program in Duchenne muscular dystrophy (DMD) was the real point of interest for investors.

Disappointingly, as Solid revealed, the program remains on clinical hold at the FDA. “We share the FDA’s commitment to patient safety and are working collaboratively with the agency to resolve the clinical hold,” said Ilan Ganot, CEO of Solid Biosciences. “We consider patient safety the utmost priority and believe the clinical development of SGT-001 could offer meaningful benefits to patients with this devastating disease.”

In April 2020, Solid submitted a response to the FDA that included changes to the clinical protocol designed to enhance patient safety, as well as information related to improvements to its manufacturing process.

The FDA has now requested further data and analyses relating to this manufacturing process. According to Solid, the company is currently generating this data and expects to submit it to the FDA before 4Q20.

Chardan Capital’s Gbola Amusa is staying on side despite the delay. He notes that the FDA is not requesting any further pre-clinical data, and writes: “We rate Solid Biosciences Buy based on the potential for Solid to help address what we believe are capacity constraints existing among AAV-based gene therapy (GT) players targeting the vast market of Duchenne muscular dystrophy” he says.  

As the analyst points out, Solid has an extremely modest valuation (>$100 mm market cap) relative to a >$50 bn global DMD AAV-based GT market opportunity. Indeed, Amusa’s $5 price target now indicates potential upside of 99% from current levels, with shares trading down 43% year-to-date.

The risks surrounding SGT-001 are well-known to the market, says Amusa, which means that any improvements in the market’s view of SGT-001 safety and/or efficacy could lead to significant share price momentum with >5x or even >10x share price upside.

Nonetheless he warns that SLDB is a particularly risky pick, as it “is more likely to fail to get its product to market than to succeed.” Notably, Evercore ISI analyst Ravi Mehrotra downgraded Solid from buy to hold on May 7. (See Solid Biosciences stock analysis on TipRanks).

The company ended 1Q20 with $53.6 mm in cash and equivalents, down from $83.5 mm at end 4Q19. Solid expects cash “will be sufficient to fund its operating expenses and capital requirements into 2021”.

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