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Longeveron: A High-Quality Emerging Biotech Play

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- By Ishan Majumdar

Stem cell research is an arm of biotechnology that has gained a lot of momentum over recent years. Many companies are focused on developing therapies using specialized cells from within the human body which possess unique regenerative qualities to repair and restore damaged tissues and organs.

One particularly interesting company is applying this kind of research to build therapies for Alzheimer's disease, aging, frailty and certain neurological disorders: Longeveron (NASDAQ:LGVN). While most of the company's research is at the clinical stage, and it has only been generating revenue from grants as well as contract manufacturing so far, I believe it could be an interesting play for biotech investors with a high risk appetite.

Company overview

Longeveron is a clinical-stage biotechnology company that is engaged in developing cellular therapies for aging-related and life-threatening conditions.

The company's lead candidate is Lomecel-B, a cell-based therapy obtained from medicinal signaling cells that are derived from the bone marrow of young healthy adult donors ranging from the ages of 18 to 45. Its therapy looks to utilize cells with regenerative properties in order to promote tissue repair, organ maintenance and better functioning of the immune system.

Longeveron is currently conducting Phase 1 and Phase 2 clinical trials of its therapy for various disorders such as aging, frailty, Alzheimer's disease, Acute Respiratory Distress Syndrome (ARDS) and Hypoplastic Left Heart Syndrome (HLHS). The management looks to advance Lomecel-B and other cell-based product candidates into pivotal Phase 3 trials with a goal of subsequent commercialization and extensive use by the healthcare community.

Lomecel-B progress

The company's lead investigational product Lomecel-B is being evaluated in multiple clinical trials and was recently approved for the Phase 2 Aging Frailty clinical trial by the Japanese Pharmaceutical and Medical Devices Agency (PMDA).

In March, the company announced that the U.S. Food and Drug Administration (FDA) has granted expanded access approval for the administration of Lomecel-B to a child with HLHS, a rare congenital heart disease that affects about 1000 babies per year. In this program, Lomecel-B will be administered via direct injection into the heart during pre-planned standard-of-care reconstructive surgery. The company has been awarded a $4.5 million multi-year grant award from the National Heart Lung and Blood Institute for this purpose. This approval has a big positive development for Longeveron and could be a real game-changer for the future of the drug.

Apart from this, Longeveron received approval from the U.S. FDA to proceed with the Phase 1 clinical trial for ARDS, which is related to either the SARS-CoV-2 or the influenza infection.

Moreover, the company also treated two Covid-19 ARDS subjects with Lomecel-B under FDA-approved expanded access. It is worth highlighting that the management claims Lomecel-B to be a drug that is easy to administer, store and freeze, which means that if it gets the necessary approvals, it could be easily distributed across the market.

Alzheimer's trials and other key developments

Alzheimer's disease (AD) is a progressive neurological disorder in which the death of brain cells causes cognitive decline and memory loss. This disease affects millions of people, leads to early mortality and creates a burden on families and societies that ultimately costs billions of dollars annually in direct costs and lost productivity.

Despite decades of research, the biotechnology and pharmaceutical industries have not succeeded in developing a safe and effective FDA-approved treatment that can prevent, slow down, or reverse the progression of AD.

Longeveron is testing Lomecel-B as a potential treatment for AD based on the hypothesis that its multiple possible mechanisms of action can simultaneously address the symptoms of AD. The management is optimistic that Lomecel-B may prove to be a disease-modifying therapy for AD.

In 2020, the company completed Phase 1 of its Alzheimer's disease trial and is highly satisfied with the safety and preliminary efficacy results. The management is expected to announce the final results of the trial in the second quarter of 2021.

If it achieves any kind of success in the AD market, the company could easily become an acquisition target for giants like Eli Lilly & Company (NYSE:LLY) and Biogen (NASDAQ:BIIB), who have been struggling for success in this market with their Donanemab and Aducanumab treatments, respectively.

It is worth highlighting that the global market size for therapeutics related to AD was around $7.42 billion in 2019 as per Medgadget data and is expected to grow to $13.57 billion in 2027 at a CAGR of 9.2%. It is a high-growth market due to the increasingly older population, and there could be a lot of growth avenues if the company makes a breakthrough in AD.

Final thoughts

As of today, Longeveron has close to $29 million on its balance sheet after its recent IPO, coupled with the grant revenues and some revenues from its contract manufacturing.

Even if we assume the company to continue burning cash at the current rate, this should easily cover its outflows for the coming two years. The company has a number of ongoing Phase 1 and Phase 2 trials in multiple countries, and if it achieves even the slightest bit of success in these trials, it could send the stock soaring to new highs.

Longeveron: A High-Quality Emerging Biotech Play
Longeveron: A High-Quality Emerging Biotech Play

As we can see in the chart above, the company's stock has stayed in the range of $5.50 to $8.50 with no significant direction, which is the case with most biotech companies that are playing the waiting game with the clinical trials and regulatory authorities.

Investing in such companies is obviously a risky proposition, which is also why the returns can be truly phenomenal particularly if the company is able to either commercialize its main candidate (in this case, Lomecel-B) or get acquired.

Longeveron has diversified the application of its research to a wide variety of diseases and has a number of trials in progress. Its past results have been promising, and I believe that the company could be an interesting pick for investors with a high risk appetite and an interest in emerging biotech stocks.

Disclosure: No positions.

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This article first appeared on GuruFocus.