Maxim Group slashed its price target for Stellar Biotechnologies (NASDAQ:SBOT) to $2 from $4, but maintained its “buy” rating, after the company reported fiscal second quarter results. The stock closed at $1.32 on May 9.
Analyst Jason McCarthy writes that anemic KLH (Keyhole Limpet Hemocyanin) sales were due to slower than expected progress of Stellar's partners in the clinic.
“However, we do believe that KLH revenue will begin to ramp in 2018 as OBI Pharma initiates a Phase 3 program in breast cancer, Neovacs reports data in a Phase 2b lupus study and new partners come on board to develop KLH-based therapies,” he said.
For Neovacs, Mr. McCarthy said the lupus data could lead to commercial launch in South Korea as well as initiation of a large global Phase 3 program. “Combined, both companies (OBI and Neovacs) will likely need significant amounts of KLH,” he added.
Mr. McCarthy said his fundamental thesis on Stellar remains "follow the partners." As partners grow, Stellar will benefit as the KLH supplier, he said, adding that Stellar's success is intimately linked to the success of its partners.