One Co. With Cell Holding Device Stands Out in T1D Space
Research Report

1. Sernova Biotherapeutics Inc. has a consulting relationship with Street Smart an affiliate of Streetwise Reports. Street Smart Clients pay a monthly consulting fee between US$8,000 and US$20,000.
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Disclosures for H.C.Wainwright & Co., Sernova Biotherapeutics Inc., April 22, 2025

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H.C. Wainwright & Co, LLC (the “Firm”) is a member of FINRA and SIPC and a registered U.S. Broker-Dealer. I, Joseph Pantginis, Ph.D., Matthew Keller, Ph.D., Sara Nik, Ph.D., Lander Egaña Gorroño, Ph.D. and Joshua Korsen, Ph.D. , certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies. None of the research analysts or the research analyst’s household has a financial interest in the securities of Sernova Corp. and Vertex Pharmaceuticals Inc. (including, without limitation, any option, right, warrant, future, long or short position). As of March 31, 2025 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Sernova Corp. and Vertex Pharmaceuticals Inc.. Neither the research analyst nor the Firm knows or has reason to know of any other material conflict of interest at the time of publication of this research report. The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services. The firm or its affiliates received compensation from Sernova Corp. for non-investment banking services in the previous 12 months. The Firm or its affiliates did not receive compensation from Sernova Corp. and Vertex Pharmaceuticals Inc. for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report. The Firm does not make a market in Sernova Corp. and Vertex Pharmaceuticals Inc. as of the date of this research report. The securities of the company discussed in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is no guarantee of future results. This report is offered for informational purposes only, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such would be prohibited. This research report is not intended to provide tax advice or to be used to provide tax advice to any person. Electronic versions of H.C. Wainwright & Co., LLC research reports are made available to all clients simultaneously. No part of this report may be reproduced in any form without the expressed permission of H.C. Wainwright & Co., LLC. Additional information available upon request. H.C. Wainwright & Co., LLC does not provide individually tailored investment advice in research reports. This research report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person. Investors should seek financial advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this research report. H.C. Wainwright & Co., LLC’s and its affiliates’ salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies that reflect opinions that are contrary to the opinions expressed in this research report. H.C. Wainwright & Co., LLC and its affiliates, officers, directors, and employees, excluding its analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research report. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data on the company, industry or security discussed in the report. All opinions and estimates included in this report constitute the analyst’s judgment as of the date of this report and are subject to change without notice. Securities and other financial instruments discussed in this research report: may lose value; are not insured by the Federal Deposit Insurance Corporation; and are subject to investment risks, including possible loss of the principal amount invested.

Sernova Biotherapeutics Inc.'s (SVA:TSX.V; SEOVF:OTCQB; PSH:XETRA) Cell Pouch "finds itself rising to the top in the type 1 diabetes space" given Vertex Pharmaceuticals Inc. (VRTX:NASDAQ) just discontinued its competing program, reported Dr. Joseph Pantginis, H.C. Wainwright & Co. analyst, in an April 22 research note. Cell Pouch is an implantable biohybrid organ for treating chronic diseases.

"Where VX-264 came up short, we see an opportunity for Sernova and its Cell Pouch device," Pantginis wrote. "We also believe visibility for the company should increase around its opportunities around its Cell Pouch system across multiple indications, starting with type 1 insulin-dependent patients."

2,757% Return Potential

H.C. Wainwright maintained its CA$6 per share target price on Sernova, trading at the time of the report at about CA$0.21 per share, noted Pantginis. Given these prices, the target implies a potential return for investors of 2,757%.

The regenerative medicine and medical device firm still is a Buy.

The company has 328.5 million shares outstanding. Its market cap is CA$67 million. Its 52-week range is CA$0.15–0.47 per share.

One Competitor Goes Away

Vertex Pharmaceuticals ended its VX-264 clinical program because Phase B of a Phase 1/2 study failed to meet the efficacy endpoint, reported Pantginis. Increases in C-peptide, a marker of insulin production, did not rise to the level needed for patients to benefit. This was determined through a mixed-meal tolerance test.

Study participants received 90 days of a full dose of the fully differentiated pancreatic cells encapsulated in Vertex's device. At that point the requisite analysis was done. It was then that Vertex discontinued the program.

Vertex, however, is continuing its zimislecel program, now in Phase 3. Formerly VX-880, zimislecel is an islet cell therapy with standard immunosuppression for patients with type 1 diabetes with severe hypoglycemic events and impaired hypoglycemia awareness.

The Key Differentiator

Pantginis highlighted that Sernova is the only company in the space that has demonstrated positive patient outcomes in a trial combining donor islets and an implantable device as treatment for patients with insulin-dependent type 1 diabetes.

In Sernova's Phase 1/2 study, a significant number of patients achieved both insulin independence and HbA1c levels in nondiabetic ranges. In many cases, the response was maintained and even deepened over time. Though these results are from an interim study, H.C. Wainwright believes they are "clear efficacy signals," Pantginis wrote. The safety profile of Cell Pouch and this treatment consistently has been good.

"We believe deep responses in diabetes patients position the technology for potential commercial success, particularly as competitors exit the space," Pantginis added. "The impressive response rates and durability support Sernova's strategy and justify further investigation."

Recently, the Data Safety Monitoring Board approved continuation of this firm's Phase 1/2 trial. Information is to come later about a Phase 3 pivotal study, including the design, estimated start, and timeline.

Cell Pouch in Hypothyroidism

Sernova has launched a second clinical program involving Cell Pouch, in hypothyroidism, for which it submitted a new investigational new drug (IND) application to the U.S. Food and Drug Administration, Pantginis relayed. The life sciences company is seeking approval to evaluate Cell Pouch, auto-transplanted with thyroid cells, in patients undergoing total thyroidectomy for nodular thyroid disease. With this program, Sernova aims to possibly reduce or eliminate the need for lifelong thyroid hormone replacement, recover thyroid hormones' natural feedback loop, reduce symptoms of low thyroid hormone levels and improve quality of life for patients with this medical condition.

In preclinical studies, production of thyroid hormones post thyroidectomy was recovered, "enough to be potentially clinical effective, in our belief," Pantginis wrote.

"We think these results were a clear indication of the capacity of transplanted Cell Pouches to act similarly to the organ," added the analyst. "We were encouraged by these data, and we still believe they serve as a strong foundation for the announced IND application submission."

Pantginis reiterated that about 150,000 thyroidectomies are done each year in the U.S. alone. Hypothyroidism is an indication with a high unmet need and an estimated US$2.2 billion (US$2.2B) market opportunity.

Opportunity in Type 1 Diabetes

H.C. Wainwright forecasts that the Cell Pouch system could reach the market in the U.S. in 2027 and gives it a 25% chance of success on sales of US$2.3B, reported Pantginis. The financial firm is basing these estimated peak sales on a minimal, roughly 2.1%, market penetration in the hypoglycemic unawares population.

Yet H.C. Wainwright believes the market could be much bigger given "the broader type 1 diabetes population and the continuing dramas surrounding insulin supply and its costs," wrote the analyst.