Laidlaw & Co. Initiates Coverage On NewcelX With Buy Recommendation

We are initiating coverage on NewcelX with a Buy rating and 12-month $23 price target. NCEL is an early clinical stage biotech company focusing on developing cell therapies with NCEL-101 as lead product. NCEL-101 is a novel pluripotent stem cells (PSCs)-derived islet-like clusters (ILC), and along with tegoprubart, a novel immunosuppressant developed by Eledon Pharmaceuticals as an islet cell transplant (ICT) – a potential curative treatment for type 1 diabetes (T1D). A Phase I/IIa study potentially could start in 1H27 with initial clinical data potentially available in 2H27 or 2028. If ultimately successful, NCEL-101 in T1D could be a multibillion-dollar commercial opportunity given the unmet need and relatively limited competition. After a unique islet cell enrichment process, the PSCs-derived ILC of NCEL-101 is comprised of ~60% functionally mature and active insulin producing and glycemia controlling cells. It is an advantage, in our opinion, since this potentially is substantially higher than the clinically most advanced competitor, zimislecel developed by VRTX. Tegoprubart, which can block innate and adaptive immunities, was part of a successful cadaver allogeneic islet transplantation Phase I/II trial. It achieved promising results of insulin independence, HbA1c level reduction without recurrent severe hypoglycemic events (SHEs). Zimislecel in T1D Phase I/II (FORWARD) study recently also achieved robust results with exogenous insulin use reduction without SHEs, and HbA1c level reached ADA/EASD target. Together, with NCEL-101’s potential better elements and a successful zimislecel FORWARD study as precedent; we view NCEL-101 in T1D could be a clinically de-risk development. Our 12-month $23 price target is based on our NPV DCF, forward P/E and peer comparable analyses.

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