Analysts Punish Otonomy Inc (OTIC) in Wake of Meniere’s Disease Drug Failure

Wednesday turned out to be a nightmare for Otonomy Inc (NASDAQ:OTIC) investors, after the drug maker announced disappointing results from a pivotal Phase 3 trial for its vertigo drug Otividex. Specifically, the trial missed its primary endpoint which was the count of definitive vertigo days by Poisson Regression analysis (p=0.62). Patients in both the Otividex and placebo groups showed similar reductions in the number and severity of vertigo episodes during the three month observation period.

Otonomy shares reacted to news, crushing over 80%, as investors viewed the experimental treatment as the stock’s main value driver.

In addition, the clinical setback triggered a spate of analyst rating/price target downgrades:

  • Piper Jaffray analyst Charles Duncan downgraded OTIC from Overweight to Neutral, while slashing the price target to $8.00 (from $32.00). “With the slow-going OTIPRIO launch now perhaps the main value driver we see in the next 12 months, and clear credibility hit from this result, we are downgrading OTIC,” Duncan said.
  • Cowen analyst Ken Cacciatore chopped his price target on OTIC to $9.00 (from $55.00), while reiterating an Outperform rating on the stock. “The company will now need to make dramatic and rapid spending reductions and the focus now turns to Otiprio […] Despite the tepid launch, we are hopefully that the product will eventually realize its potential given the revamped commercial efforts, leadership changes, and potential indication expansion opportunities,” Cacciatore stated.

Out of the 3 analysts polled in the past 3 months, one is bullish on Otonomy stock, while two are sidelined. With a return potential of 151%, the stock’s consensus target price stands at $9.

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