Ladenburg stars Arch Therapeutics at buy; PT $1.25

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Ladenburg Thalmann initiated coverage of Arch Therapeutics (OTCQB:ARTH) with a “buy” rating and price target of $1.25. The stock closed at 46 cents on Sept. 11.

The company is developing a novel hemostat to control skin and internal bleeding, known as AC5 Topical and AC5 Surgery, respectively. AC5 is a synthetic peptide comprising L-amino acids that self-assembles into a physical, mechanical nanoscale structure that provides a barrier to leaking substances, such as blood, writes analyst Michael Higgins.

Compared with products in the $3-billion and $1.2-billion global hemostat and sealant markets, he said “AC5 provides faster hemostasis and combines more desirable features than any current hemostat or sealant: not impacted by blood thinners; compatible with endoscopic surgeries; transparent; limited adverse event risks; and ease of use.”

AC5 Topical has completed preclinical and two clinical trials to support a 510(k) filing in the third quarter of 2018. Following 510(k) approval, which is likely before year-end, he said trials for the larger market opportunities for AC5 Surgery are expected to initiate in late 2019.

“Per recent peer acquisitions, we believe Arch is greatly undervalued, representing a buying opportunity ahead of its first regulatory approval,” Mr. Higgins said.

Stephen Kilmer