Yesterday I spoke privately with senior management from Arcturus Therapeutics (ARCT) , CEO Joe Payne, CFO Andy Sassine and Neda Safarzadeh, head of investor relations and marketing. I have followed Arcturus for several years, and have attempted to educate myself on the company's patented messenger RNA delivery system LUNAR, which has been aided by the company's proprietary mRNA manufacturing process, STARR. With 187 patents and counting, Arcturus is an intellectual property powerhouse in the mRNA space. The company has made the difficult leap from preclinical to clinical stage with joint trials currently underway in the U.S. and New Zealand for the company's ARCT-810 drug, which treats Ornithine transcarbamylase (OTC) deficiency, a rare genetic disorder.
Arcturus also has a candidate for a Covid-19 vaccine.
That's where the story gained widespread interest and this little company from San Diego became not-so-little anymore, with a market cap of nearly $800 million at today's price of $39 per share. That market cap was over a billion dollars Monday, and yesterday's selloff in ARCT was attributable to concerns about, who else, Moderna (MRNA) .
The promise of therapeutic uses for messenger RNA -- using that protein-creating material to, in effect, turn the human body into its own medicine producer -- is so incredibly appealing that I find it unfortunate that the market uses Moderna, with its star chamber-like opacity and questionable corporate governance, as a barometer for the technology. Moderna insiders have sold over 2 million shares in the past month, and the company itself sold 20 million shares through a "bought deal" offering with Morgan Stanley on the back of the announcement of positive results from that company's Covid-19 vaccine candidate, mRNA-1273. As Moderna's pump-and-dump moved into the inevitable second phase, there have been questions raised over the sufficiency of data released (only eight patients produced full results) and possible adverse reactions to mRNA-1273, as reported by industry publication STAT News.
I didn't want to steal ARCT management's thunder on our call, but the Moderna-sized elephant in the room had to be addressed. Payne noted that the early results from mRNA-1273 were what he expected from a conventional mRNA formulation. He also noted that the treatment Arcturus is currently manufacturing, LUNAR-COV19, is a lower dose than Moderna's mRNA-1273 and requires only one application ("single-shot") versus Moderna's double-dosing. Other things equal, that could lower the chances of adverse reactions. Arcturus expects to begin LUNAR-COV19 trials in Singapore this summer at Duke-NUS hospital under the auspices of Singapore's national health authority, the HSA.
This is exciting stuff, and Arcturus has some pretty powerful backers of its own. In the first quarter alone, ARCT received collaboration payments from Ultragenyx, Janssen, mRNA pioneer CureVac and Takeda. Nasdaq-listed Ultragenyx (RARE) owns 14.6% of ARCT after exercising a recent option to purchase an additional 600,000 shares at $16 per share, and has the right to increase its ownership to 19.9%. That $9.6 million covers about one quarter's worth of ARCT's cash burn. Sassine reiterated on our call his belief that the $59.5 million of cash on ARCT's balance sheet as of March 31, plus the investment from RARE, plus the $75 million in proceeds from the company's follow-on offering in April, plus a $5 million payment from the Government of Singapore will be enough to fund the company for at least the next two years.
When I first started buying ARCT shares I did not conceive of a valuation of $1 billion, but I also didn't conceive of the global impact of a pandemic such as Covid-19. I am rooting for anyone -- Gilead (GILD) , Novavax (NVAX) , Merck (MRK) , even Moderna --to come up with a Covid-19 vaccine. If that vaccine comes from a collaboration between a company I know well and my old school (I'm a Duke grad) then that would be truly wonderful.