Seeking Alpha • Aug 12
Provention Bio: More Risk, More Dilution Ahead - Downgrading To A Sell Rating
BLA was delayed again to October/November due to FDA's request around PK data.
Uncertainty around Teplizumab remains, and we are not a big fan of the FDA's recent request and delay in BLA.
The company's warrant structure looks messy; PRVB has a long history of punishing investors with stock dilution.
We downgrade the stock to sell from a hold rating.
BLA delayed again to October/November
The company provided additional color during the 2Q22 earnings call around information requests from the FDA; these are the key takeaways i) FDA information was requested from the FDA regarding incorporating ADA data in PK modeling of dosing regimen, ii) FDA's request resulted in the extended BLA decision date to Nov 17, iii) ADA does not impact the regimen for exposure or output of the model, and iv) there is no additional outstanding request from the agency at the moment.
The rationale for the delay?
FDA's rationale for the request during mid-June was to understand whether ADA levels would influence the recommended dosing adjustments set by the agency. As such, the company re-analyzed the data and found that the proposed dosing regimen remains unchanged by ADA levels and datapoints were consistent with the bioequivalency of legacy and commercial products. However, as the update was considered a major amendment, FDA indicated that they plan to discuss labeling and post-marketing requirements by Oct 17, 2022.
What next?
The key focus at this point is when investors will receive more clarity around the proc; during the Q2 earnings call, the company indicated that they would be able to provide additional regulatory updates during the Q3 earnings call planned around early Nov, based on their historical reporting timeline, as such, with the level of uncertainty, we remain on the sidelines.
Even though there were rumors about label discussion, which indicates a higher likelihood of approval of the agent, during the Q2 earnings call, the company emphasized that the proposed label discussion will only continue if there are no deficiencies identified during the review period (FDA will communicate to the company by Oct 17).
More messy warrants don't look good
...Today announced it has entered into a securities purchase agreement with institutional investors for the private placement of approximately $60 million of shares of its common stock and warrants to acquire 13,318,535 additional shares of its common stock (the "Warrants") (collectively, the "Securities"). The Warrants will be exercisable immediately upon issuance, in whole or in part, at an exercise price of $6.00 per share and will have a five-year term. Source: Provention Bio Announces $60 Million Private Placement
As we flagged in our previous report, the company raised additional capital to finance its operation. We are not a fan of messy warrants as they can dilute the share value.