Summary
- Homology Medicines is a US-based genetic medicines biotech company aiming to treat rare genetic diseases with an unmet medical need.
- Homology Medicines has a pipeline of 1 Phase 1/2 therapeutic (HMI-102), 3-IND-enabling phase therapeutics, and 3 in the early research phase on top of two partnerships with Pfizer and Novartis.
- Homology Medicines is revenue producing <$5M on top of a reasonable cash basis ($178M + Pfizer payment) to fund operations till 3Q 2022. First-commercialization isn't expected until 2026-2027.
- Homology Medicines' 2021 catalysts will be the Phase 1/2 completion for HMI-102 in June 2021 and a new therapeutic progressed into clinical during 2H2021 with potential candidates being HMI-202, HMI-203, HMI-103.
- In summary, the author projects Homology Medicines, Inc. as a "BUY" at a 1-year price target of $15.87 (+29% upside).
Graphic Source: Homology Medicines, Inc.
Introduction: What is Homology Medicines?
Homology Medicines (FIXX) is a US-based genetic medicines biotech company aiming to treat rare genetic diseases with an unmet medical need. Homology Medicines has produced a unique platform for human hematopoietic stem cell-derived adeno-associated virus vectors (AAVHSCs) which aim to specifically deliver single administration genetic medicines in vivo via gene therapy or their rather interesting nuclease-free gene editing vectors which have been tested in targets ranging from the liver, central/peripheral nervous system, bone marrow, muscle, and eyes.
Founded in 2015, Homology Medicines has since grown to a large employee base of 206 on top of a mild market cap of $590M and a brand new $60M equity partnership with Pfizer (PFE) in November. Homology Medicines has very competent management specialized in niche early-stage clinical candidate development aiding their innovative therapeutic strategy. Cash on hand is sufficient and the upside is certainly present making Homology Medicines a "buy" at a 1-year price target of $15.87 (+29% upside).
Pipeline/partnerships
Homology Medicines has a pipeline of 1 clinical Phase 1/2 therapeutic (HMI-102), 3 IND-enabling-phase therapeutics, and 3 in the early research phase. Homology Medicines has inked two fresh partnerships with Pfizer covering phenylketonuria ("PKU") and Novartis (NYSE:NVS) covering ophthalmic targets. The former was introduced in November with a $60M equity investment showcasing promise for Homology Medicines' technology and particularly for the PKU therapeutic investors have been pessimistic towards. This highlights the potential unseen upside as the PKU market size is estimated to reach $834M by 2024.
Management
Homology Medicines has been led by Arthur Tzianabos, Ph.D., since March of 2016 and through the 2018 IPO of $18/share to the current $12.34/share. Arthur brings 25+ years of experience in biotechnology having led various teams through the clinical process all the way to commercialization in rare diseases. Before Homology Medicines, Arthur spent 2-years leading OvaScience as President and CSO before its merger with Millendo (MLND). Before that, he spent 9 years at Shire (SHPG) most recently as Head of Research and Early Development. It seems he's gained strong expertise in early-stage pipelines and the clinical process having covered development, approval, M&A, and commercial launches of several genetic therapeutics in rare diseases. He also currently sits on two boards, Stoke Therapeutics (STOK) and Akouos (AKUS), the latter as Chairman.
Financial position
Homology Medicines is an early-stage biotechnology company and with that status comes certain expectations. The first is that profitability isn't expected until 2026, post 1st therapeutic commercialization, particularly HMI-102 for PKU. The second factor is that cash-generating revenues are widely inconsistent (FYE 19: $2.3M | E 2020: $2.37M) presenting a requirement for constant shareholder dilution, which came to 20.6% in FYE 19 and most likely will continue. Homology Medicines has stated that they expect their cash resources ($178M + Pfizer payment) to fund operations till 3Q 2022, but this doesn't mean an investor will not experience continued dilution, particularly heightened when cash dips below $200M and very likely if below $100M, though the new Pfizer agreement will help postpone short-term cash needs.
