Eledon Pharmaceuticals (NASDAQ:ELDN) is headquartered in Irvine, California. Novus Therapeutics, Inc. was founded in 2017. Eledon Pharmaceuticals was formed in 2021 after the business purchased Anelixis Therapeutics and its anti-CD40K program.

Tegoprubart, a highly selective humanized IgG1 anti-CD40L antibody, is the company’s lead product candidate. The CD40/CD40L signaling pathway is involved in autoimmune illness, transplant rejection, and neuroinflammation.

Tegoprubart specifically inhibits CD40L, avoiding the lymphopenia seen with CD40-targeting immunosuppressive drugs. It also has a more than 2-fold longer half-life and is less immunogenic than anti-CD40 immunosuppressive drugs.

Tacrolimus, a nephrotoxic immunosuppressive medication used after kidney transplantation, lowers eGFR, a marker of kidney function used to assess graft rejection. It also raises the risk of developing new-onset diabetes. eGFR is used as a marker of graft rejection and is typically in the 50-51s mL/min/1.73 m2 at 6-12 months after current medications like Tacrolimus, Belatacept, and Iscalimab.

Tegoprubart demonstrated higher eGFR than the standard of care, SOC, in Phase 1b trial (77 mL/min/1.73 m2 at week 31 vs. in the 50s with SOC). There was no new diabetes onset.

Tegoprubart has the potential to improve the clinical outcome of post-kidney transplantation patients because eGFR at 12 months is an early indicator of kidney graft failure and hospitalization rate. A Phase 2 trial, scheduled to begin in the middle of the year, will compare the medication to the SOC, with eGFR as the primary endpoint. Because the treatment lasts 52 weeks, data could be available by the end of 2024.

Another indication is Amyotrophic Lateral Sclerosis, where the medication demonstrated dose-dependent B and T cell engagement and lowered pro-inflammatory target biomarkers at week 12.

David-Alexandre Gros, MD, the company’s CEO, has over 20 years of expertise in biotechnology and pharmaceuticals, including top roles at Sandoz, McKinsey, Sanofi, NantKwest, and others. He was also the Chief Operating Officer of Neurocrine Biosciences (NASDAQ:NBIX) and the Chief Business Officer of Alnylam Pharmaceuticals (NASDAQ:ALNY).

After the recent fundraising in which Sanofi participated, cash reserves are approximately $80 million, which is a positive indicator. The overall value of the financing transaction is $185 million. There is enough cash to last until the end of 2024, and there is no long-term debt.

The target market for kidney transplantation in the United States is $375 million per year (assuming 250K procedures per year in the United States and an annual cost of $15K/patient comparable to already approved immunosuppressive drugs). The enterprise value is currently negative, therefore the stock is severely undervalued, but it is beginning to recover.

Pharmaceutical stocks are valued at four times their peak sales. Even with a 20% post-kidney transplant market share, a 15% cost of capital, and peak sales in 2033, six years after launch (assuming medication launch in 2027), the reasonable enterprise value is $18.5M. I did not consider ALS in my assessment, which could lead to additional benefits. I feel the company is now undervalued, with a negative enterprise value, and investors are overlooking the pipeline. The average analyst price target is $18.40 (573% upside).

Underwhelming findings from current trials in kidney transplantation and ALS are among the risks of the investment. Much of the above valuation is dependent on the pipeline’s kidney transplantation component. Any unexpected decrease in eGFR or negative effects in the Phase 2 study may cause the stock price to plummet. Investing in early-stage biotech and pharmaceutical stocks is hazardous and may not be suited for all investors. Investing in developmental-stage biotech/pharma enterprises can result in a loss of capital. This note is my own opinion and does not constitute professional investment advice.

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