Tuesday, 11 August 2020

Arbutus Is The Next Major COVID Runner After Moderna Admits Potential Patent Infringement

Arbutus Biopharma Corporation (ABUS)
Current Price: $4.30
Target Price: $50.00
Upside Potential: 1,062%
Market Cap: $348 million
Shares Outstanding: 81 million
Float: 39 million

Arbutus Biopharma Corporation (ABUS) has been in focus after a court ruling went in favor of ABUS and against Moderna, Inc. (MRNA) for a patent owned by ABUS relating to technology that MRNA uses in its vaccines, including its COVID-19 candidate. ABUS initially spiked over $9 two weeks ago but has since pulled back under $4 after Moderna stated that the patent ruling did not impact its COVID-19 vaccine development. Now that Moderna has admitted the truth that it "cannot be certain" about the status of its IP, ABUS is ready to fly as the next major COVID runner. It closed on Tuesday at $3.44 but after hours activity saw it jump 25% to $4.30 on the news. We think this is just the beginning and it could rise as high as $50. Stocks like Sorrento Therapeutics, Inc. (SRNE), Vaxart, Inc. (VXRT) and Inovio Pharmaceuticals, Inc. (INO) have jumped to multi-billion valuations on their COVID candidates. Under this circumstance, ABUS wouldn't have to do anything but collect a royalty from MRNA. It also proves that its IP is ideally suited to fighting COVID and it could develop its own solution to combat the virus.  We are up to 912 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel as well as follow our Small Caps, Big Gains blog where we put up our Canadian picks. You can also follow us on Twitter @StockTradePicks which has over 4,500 followers.

We previously stated that MRNA's denials about infringing on ABUS patent might lead to the SEC getting involved for manipulation. MRNA clearly did not want that possibility so it admitted for the first time in its quarterly filings the following:

"As the field of mRNA therapeutics and vaccines is maturing, patent applications are being processed by national patent offices around the world. There is uncertainty about which patents will issue, and, if they do, as to when, to whom, and with what claims. It is likely that there will be significant litigation and other proceedings, such as interference, reexamination, and opposition proceedings, as well as inter partes and post-grant review proceedings introduced by provisions of the America Invents Act, which became available to third-party challengers on September 16, 2012, in various patent offices relating to patent rights in the mRNA field. We expect that oppositions will be filed in the European Patent Office, or EPO, and elsewhere relating to patents and patent applications in our portfolio. In many cases, the possibility of appeal exists for either us or our opponents, and it may be years before final, unappealable rulings are made with respect to these patents in certain jurisdictions. The timing and outcome of these and other proceedings is uncertain and may adversely affect our business if we are not successful in defending the patentability and scope of our pending and issued patent claims. For example, a third party request for reexamination has been granted against one of our U.S. patents, which relates to our infectious disease vaccine program. We cannot be certain that such patent will survive or that the claims will remain in the current form. In addition, third parties may attempt to invalidate our IP rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our IP rights. Our defense against any attempt by third parties to circumvent or invalidate our IP rights could be costly to us, could require significant time and attention of our management, and could have a material adverse impact on our business and our ability to successfully compete in the field of mRNA therapeutics.
There are many issued and pending third-party patents that claim aspects of oligonucleotide delivery technologies that we may need for our mRNA therapeutic and vaccine candidates or marketed products, including mRNA-1273, if approved. There are also many issued third-party patents that claim targeting genes or portions of genes that may be relevant for mRNA medicines we wish to develop. For example, we are aware of a third-party patent directed to methods of using mRNA to treat Fabry disease. In addition, there may be issued and pending patent applications that may be asserted against us in a court proceeding or otherwise based upon the asserting party’s belief that we may need such patents for our mRNA therapeutic candidates. Thus, it is possible that one or more organizations will hold patent rights to which we may need a license, or hold patent rights which could be asserted against us. If those organizations refuse to grant us a license to such patent rights on reasonable terms or a court rules that we need such patent rights that have been asserted against us and we are not able to obtain a license on reasonable terms, we may be unable to perform research and development or other activities or market products, including mRNA-1273, covered by such patents."

This comes on the heels of the ABUS patent office news as well as a $1.5 billion deal for MRNA for 100 million doses of its COVID vaccine in the United States. MRNA can ill-afford stalling development or commercialization of the vaccine due to a patent issue. This must go away as quickly as possible and the best case scenario is a buyout or a settlement of ABUS and Genevant. 

The patent in question is owned by Genevant, a company related to ABUS and which ABUS owns a 16% stake. ABUS is also entitled to a royalty. While the patent is owned by Genevant, it's a private company so ABUS is the only stock available to traders to speculate on the outcome of this deal. The financial media is clearly focused on the ABUS side of things, which means it will be the one conducive to FOMO trading. Reuters said this about the development, mentioning ABUS and not Genevant:

Moderna says uncertain about coronavirus vaccine patent exclusivity

(Reuters) - Moderna Inc (MRNA.O) said there was a possibility it was not the first company to make breakthroughs claimed in its patent applications, including those for its experimental coronavirus vaccine, according to a recent regulatory filing.

The statement by the U.S. drug developer was made in a quarterly filing on Aug. 6 under mandatory disclosures of risks to its business.

Moderna’s prior quarterly filings with U.S. regulators did not have the disclosure.

"For this and other reasons, we may be unable to secure desired patent rights, thereby losing exclusivity," the company said. (bit.ly/2PISREC)

The company has received funding from the U.S. government to develop its coronavirus vaccine, and in July lost a bid to invalidate a U.S. patent owned by Arbutus Biopharma Corp (ABUS.O) that poses a potential obstacle to Moderna’s efforts to develop next-generation vaccines.

“We cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions, including mRNA-1273,” the company said.

Based on some of the moves we have seen in the market recently on much weaker news than this, we think that ABUS could race to as high as $50, or around a $4 billion market cap. 

Disclosure: We are long ABUS

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