Janney: 4 Reasons Why Selecta Biosciences Is 'Significantly Undervalued'

Selecta Biosciences Inc SELB shares plummeted in November 2017 from the $20 level and have yet to recover.

The stock should not only recoup all of its losses, but trade at new all-time highs, according to Janney.

The Analyst

Janney's Yun Zhong initiated coverage of Selecta Biosciences with a Buy rating and fair value estimate of $33.

The Thesis

Selecta's stock plummeted in late 2017 in reaction to a negative update to the company's Phase 2 study of SEL-212 for the treatment of chronic refractory gout, Zhong said in the Wednesday initiation note. This creates a scenario where the stock is now "significantly undervalued" for four reasons, the analyst said:

SEL-212 is likely to be proven as a superior drug compared to therapies already OK'ed by the FDA, the analyst said. Selecta's therapy has already demonstrated a higher response rate and an improved dosing regiment, and a Phase 3 study should show even better efficacy, he said.
The "evidence is clear" that SVP-rapamycin truly induces immune tolerance versus patients treated without SVP-rapamycin.
Selecta is expected to report data from a new cohort of SVP-rapamycin in the third quarter. This could prove to be an imminent catalyst for the stock, as the data is expected to show sustained efficacy and offer a readthrough to the Phase 3 studies, which will evaluate a similar improved dosing regiment.
Selecta's pipeline offers "strong upside potential," including a program evaluating SVP-rapamycin in repeat treatment with AAV gene therapy, the analyst said. It's "one of the most discussed topics" in all of gene therapy, and the company's therapies are likely to stand out against competing products, Zhong said.

Price Action

Selecta Biosciences shares were trading higher by more than 3 percent at the time of publication Wednesday.

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