HCW starts Innovate Biopharma at buy; PT $35


H.C. Wainwright initiated coverage of Innovate Biopharmaceuticals (NASDAQ:INNT) with a “buy” rating and $35 price target. The stock finished at $8.08 on July 17.

Innovate is focused on two clinical-stage assets aimed at diseases of the gastrointestinal tract. The first of these candidates, larazotide acetate, or INN-202, is being developed to treat celiac disease, a condition involving sensitivity to gluten, a protein found in wheat.

Analyst Raghuram Selvaraju writes that larazotide's mechanism of action, reducing intestinal permeability by regulating the tight junctions of the intestinal epithelium, is broadly applicable across a range of diseases, including liver inflammation and fibrosis, cancer immunotherapy, and rare tropical disorders like environmental enteric dysfunction. 

“We consider larazotide a true ‘pipeline in a pill’ and believe that Innovate could succeed in positioning multiple formulations of this compound on the market in different disease areas,” he added. 

Mr. Selvaraju said the company’s second pipeline candidate, INN-108, for treatment of ulcerative colitis (UC)also appears risk-mitigated. 

INN-108 is based on two existing marketed products: mesalamine, or 5-ASA, and Actarit, or 4-APAA, that have demonstrated potent anti-inflammatory effect. 

“Since 5-ASA and 4-APAA have distinct anti-inflammatory properties, they function synergistically and thus could have clinical benefit superior to existing branded and generic mesalamine formulations,” he added. “We believe that, if this can be demonstrated clinically, INN-108 could become a best-in-class agent for the treatment of mild-to-moderate UC. 

Stephen Kilmer