Piper Jaffray and William Blair are joining the conversation on falling stocks Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) and DXP Enterprises Inc (NASDAQ:DXPE) after volatile news has incited negative investor sentiment. While Piper Jaffray remains bullish on Rigel despite a Phase 3 miss that sent shares plunging down 22%, William Blair remains sidelined on DXP and has lowered earnings forecasts on back of a week third-quarter preannouncement, which sent shares today tumbling 16%. Let’s dive in:
Rigel Pharmaceuticals, Inc.
Rigel shares are on a 22% nosedive after the biotech company reported results from its second Phase 3 trial for fostamatinib in Immune Thrombocytopenic Purpura (ITP), an autoimmune disease where the immune system attacks and destroys platelets in the blood.
However, though Piper Jaffray analyst Joshua Schimmer acknowledges the second Phase 3 study “just misses,” he nonetheless reiterates an Overweight rating on shares of RIGL with an $11 price target, which represents just under a 342% increase from where the stock is currently trading.
Schimmer explains, “The primary topic of discussion for RIGL after the first positive study was the likely need to again hit a 0% placebo response in the second trial for it to hit stat sig. With no room for error on this front, even the 1/24 placebo response rate was enough to throw off stats and lead to a negative study.”
The way the analyst assesses the situation, “If the company gets the green light to file based on these results, an advisory committee review will presumably be needed– but with one positive trial and one near-miss and strong pooled data, we believe fostamatinib is still in good shape.”
For Schimmer, though the placebo response “threw off the stat analysis” of the firm’s second study, he still believes the trial reveals an “impressive” p-value of 0.007, and this has the basis for a “potentially compelling argument for approval,” even if shares are presently on a downward spiral.
Ultimately, “we believe the risk reward profile remains favorable and the company did an excellent job on the conference call explaining the results and supporting a clear therapeutic benefit from the drug,” Schimmer concludes.
Moving forward, RIGL intends to gain regulatory feedback in the next few months to file for approval come first quarter of 2017, with later plans for an Ad Comm around year’s end and PDUFA by the first quarter of 2018.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, one-star analyst Joshua Schimmer is ranked #3,312 out of 4,180 analysts. Schimmer has a 45% success rate and faces a loss of 0.7% in his annual returns. However, when recommending RIGL, Schimmer realizes 32.5% in average profits on the stock.
TipRanks analytics indicate RIGL as a Strong Buy. Based on 5 analysts polled in the last 3 months, 100% rate a Buy on RIGL. The 12-month price target stands at $7.63, marking a nearly 214% increase from where the shares last closed.
DXP Enterprises Inc
DXP Enterprises preannounced sales and EBITDA results that underperformed the Street as well as William Blair analyst Ryan Merkel‘s expectations. As such, the analyst reiterates a Market Perform rating on DXPE with a price target of $29, which represents a nearly 20% increase from where the shares last closed.
On the heels of a weak preannouncement, Merkel has lowered his 2016 EBITDA projection from $52 million to $46 million and his 2017 EBITDA projection from $59 million to $47 million.
The analyst notes, “Bookings and shipments were soft during the first two weeks of July, possibly related to customer plant shutdowns. Sales in August and September improved more in line with year-to-date monthly trends, but were not enough to offset July. The big issue is that the 40% of sales tied to oil and gas is under significant pressure. ”
Moreover, this weakness could continue through the next quarter. Merkel explains, “Management said the holiday season, elections, seasonal shutdowns, and the recent sale of a business unit (Vertex) could affect fourth-quarter performance. The good news is that cost containment and free cash flow are tracking well.”
For now, “We will maintain a cautious stance until we see evidence that key customers are starting to loosen the purse strings. Rising oil prices and North American rig counts is a good first step,” Merkel contends.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Ryan Merkel is ranked #294 out of 4,180 analysts. Merkel has a 73% success rate and earns 18.6% in his annual returns.