This Analyst Is a Strong Buyer of Otonomy Inc (OTIC) Stock

OTIC stock fired to the roof after successful late-trial results in Meniere's; Edward Nash cheers.


Otonomy Inc (NASDAQ:OTIC) was Wall Street’s bull of the day yesterday with shares that flew 83%. The cause of all the enthusiastic commotion? The drug maker’s AVERT-2 Phase III study of Otividex turned out successful top-line data, achieving high statistical significance considering count of definitive vertigo days (DVD), landing at a p-value of 0.029.

SunTrust analyst Edward Nash continues to back his bullish perspective, cheering that at these levels, “we […] would be strong buyers” of the compelling biotech stock, reiterating a Buy rating on OTIC stock with a $15 price target, which represents a just under 193% upside from where the shares last closed. (To watch Nash’s track record, click here)

“The results demonstrated in the AVERTS-2 study are in sharp contrast to those seen in AVERTS-1, which failed all end-points,” the analyst writes, adding that the OTIC team intends to meet with the agency to discuss registrational requirements for its Meniere’s asset and offer an update in the first quarter of next year.

As such, Nash is confident moving forward. “We […] are bullish going into 1Q18 with discussions with the FDA on the path forward for Meniere’s,” notes Nash, explaining that his expectations do not factor in Meniere’s upside, which could translate to an over $800 million opportunity worldwide.

The analyst asserts, “The successful Phase II trial “catches everyone by surprise,” highlighting that it was not long ago Otonomy had a failure on its hands: “Recall that on August 30th of this year Otonomy reported that AVERTS-1 had failed the primary endpoint with a p-value of 0.62 as well as all other endpoints. Management is still analyzing the data and could not provide an answer on the call at this time for what contributed to the drastic differences in outcomes between AVERTS-1 and AVERTS-2 trials.”

It is quite possible domestic investigators talked “highly” of Otividex’s clinical advantages amid patient recruitment for AVERTS-1 trial enrollment, Nash concludes, highlighting:  “Since DVD data are recorded in a daily diary and are subjective, the comments from the trial investigators may have had a psychological effect on patients, which may contributed to the high placebo effect in AVERTS-1 trial. We view the AVERTS-1 results as an outlier and believe the clinical benefits of Otividex are real. This is clearly supported by the Phase IIb.”

Wall Street is split between the entirely confident and the cautious on the drug maker’s opportunity at play, as according to TipRanks, based on 4 analysts polled in the last 3 months, half rate a Buy on Otonomy stock while half maintain a Hold. The 12-month average price target stands at $12.00, marking a nearly 134% upside from where the stock is currently trading.

  • Mark Robert Heywood

    Author is up less than 9% over the last year on his recommendations, This stock is a short term short.