CA Pharma Co. Reports Positive Phase 3 Data for Schizophrenia Treatment
Research Report

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Disclosures for EF Hutton, Reviva Pharmaceuticals Holding Inc., September 23, 2024

Analyst Certification I, Jason Kolbert, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

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EF Hutton analyst Jason Kolbert, in a research report published on September 23, 2024, initiated coverage on Reviva Pharmaceuticals Holdings Inc. (RVPH: NASDAQ) with a Buy rating and a price target of US$15.00. The report follows Reviva's announcement of positive Phase 3 data for its lead candidate, Brilaroxazine, in the treatment of schizophrenia.

Kolbert highlighted the significance of the Phase 3 results, stating, "The Phase 3 Schizophrenia trial announced positive topline results. The trial met its primary endpoint at the 50 mg dose, with Brilaroxazine achieving a statistically significant and clinically meaningful 10.1-point reduction in Positive and Negative Syndrome Scale (PANSS) total score compared to placebo (-23.9 Brilaroxazine 50 mg vs. -13.8 placebo, p<0.001) at week four."

The analyst explained the mechanism of action for Brilaroxazine, describing it as a serotonin-dopamine activity modulator (SDAM) that "works by targeting multiple neurotransmitter receptors, such as Serotonin Receptors, where Brilaroxazine acts as a partial agonist at 5-HT1A, 5-HT2A, 5-HT2B, 5-HT2C, and 5-HT7."

Kolbert also noted potential applications beyond schizophrenia, including bipolar disorder, depression, and inflammatory diseases such as psoriasis, idiopathic pulmonary fibrosis (IPF), and pulmonary arterial hypertension (PAH). However, he emphasized that the valuation focus remains on the schizophrenia market in the U.S. and Europe.

Regarding Reviva's strategic plans, Kolbert mentioned that the company expects to file a New Drug Application (NDA) in Q1 2026. He also addressed the company's capital structure, noting, "The company was not properly capitalized and raised additional capital with 'technical' funds that realized an opportunity to trade the stock. A key challenge for the company going forward is to attract fundamental institutional capital to the story."

The analyst's valuation methodology incorporates multiple indications with a probability of success factor of 70% for the schizophrenia indication. Kolbert explained, "We apply a 30% discount rate (r) to our models. We assume additional capital will be raised in our final share count. We then use these projections to our Free Cash Flow to the firm, or FCFF discounted EPS or dEPS, and sum-of-the-parts or SOP models, which are equal-weighted, averaged, and rounded to the nearest whole number to derive our 12-month price target of US$15."

Kolbert addressed the current low stock price, stating, "If Reviva has a Phase 3 asset in Schizophrenia, a multi-billion-dollar market, why is the stock trading at US$1 with a market capitalization below US$100M?" He attributed this to the company's SPAC origins and subsequent capital-raising challenges.

Looking ahead, the analyst identified key events for investors to watch, including "Long-term safety data from the Phase 3 Long-term trial, n=100 (1-year) follow-up. Data is expected by the end of 2024. Beyond the safety data, we are watching the Phase 3 RECOVER-2 Study."

In conclusion, EF Hutton's initiation of coverage with a Buy rating and US$15 price target reflects a positive outlook on Reviva Pharmaceuticals' potential in the schizophrenia treatment market, with additional upside from possible applications in other indications.