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Revisiting Chiasma
Dec. 02, 2020 6:48 AM ETChiasma, Inc. (CHMA)7 Comments11 Likes
Summary

Today, we revisit Chiasma for the first time in over a year.
This promising small-cap name recently posted some encouraging trial results and has seen a big recent insider purchase by its CEO.
We revisited the investment thesis on Chiasma in the paragraphs below.
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Today, we take an in-depth look at a small-cap biotech concern for the first time since September 2019. The company continues to enjoy sparse but sanguine analyst coverage. More importantly, the equity saw the biggest insider buy in the shares in many, many years and also posted some recent encouraging trial results. We revisit the investment thesis in full in the paragraphs below.

Company Overview:

Chiasma Inc. (CHMA) is a Massachusetts based clinical-stage biopharmaceutical. The company focused on improving existing treatments for rare and serious chronic disease. Since we last revisited this name, the company's primary compound MYCAPSSA was approved in June of this year for the treatment of acromegaly. The drug started to hit the U.S. market in September.

Source: Company Presentation

MYCAPSSA is the only oral somatostatin analog and is a derivative of Chiasma's Transient Permeability Enhancer (TPE) technology platform, which was created to develop oral therapies as an alternative to injections.

Source: Company Presentation

The stock of Chiasma currently trades just over $4.00 a share and has an approximate market cap of $250 million. The shares came public in 2015 at $16.00 per share. Therefore, the stock is deep in 'Busted IPO' territory.

Recent Events:

On November 23rd, the CEO bought nearly half a million dollars of new shares. It was easily the biggest insider buy in the stock since the company came public in 2015. On November 18th, the company announced:

"Positive top-line data from its global Phase 3 MPOWERED non-inferiority clinical trial comparing Mycapssa to long-acting injectable somatostatin analogs (SSAs) for maintenance of biochemical response in patients with acromegaly."

Full data sets of this study will be presented at several medical conferences in the first half of 2021. The company plans to file for marketing approval for MYCAPSSA in Europe in mid-2021.
Balance Sheet & Analyst Commentary:

The company gets sparse but positive coverage from analyst firms. In mid-August, Jefferies initiated the shares with a Buy rating and $8 price target. Here is the commentary from the analyst at Jefferies.

"With an expected launch for Mycapssa, the first FDA-approved oral medication for acromegaly, in Q4, the analyst says the company is poised to capture a large portion of the market as patients move away from painful and burdensome injectable therapies. The analyst conservatively estimates that if ~50% of patients on injectables attempt the oral medication, the company could capture $300M+ in U.S. sales."

Source: Company Presentation

In addition, Piper Sandler reiterated its Buy rating and Street high $19 price target on CHMA on November 5th following third-quarter results. The analyst noted "that the company reported its first Mycapssa sales at $142K, and he sees strong demand for an effective oral therapy from acromegaly patients who currently receive painful monthly injections and experience break-through symptoms." H.C. Wainwright maintained its Buy rating and $10 price target on Chiasma the next day.

Thanks to a $75 million secondary raise in July as well as $25 million and $15 million fund infusions through the company's revenue interest finance agreement with Healthcare Royalty Partners which was triggered by the FDA approval and first commercial sale of MYCAPSSA, Chiasma ended the third quarter with just over $175 million of cash on the balance sheet. It posted a loss of $18.5 million in third quarter which should come down as MYCAPSSA ramps up in the coming quarters.
Verdict:

The stock is extremely cheap if the estimated peak sales of MYCAPSSA of $300 million are anywhere close to being in the ball park given they would be bigger than the company's current market cap. The compound also has many years of market exclusivity.