Our 12-month price target for ARCT is $49 derived using a discounted cash flow (DCF) analysis. We use a weighted average cost of capital (WACC) of 13.5% and a 0% terminal growth rate post 2036. Arcturus’ issued patents are expected to expire between 2028 and 2038. Pending patents are expected to extend through at least 2041 for ARCT-810. Arcturus anticipates patents covering the STARR platform will extend to at least 2041. Additional pending patents and patent extension programs such as Hatch-Waxman could extend Arcturus’ patent protection.

We rate ARCT High Risk based on the usual volatile nature of small-cap biotech companies. The following sources of downside risk could disprove our Buy thesis and cause shares to underperform our target: 1) demand for Arcturus’s Covid vaccine in Japan is lower than we anticipate; 2) Ph2 data for ARCT-810 in OTC deficiency fall short of expectations; and 3) Ph2 data for ARCT-032 in CF fall short of expectations.