Today was an explosive day in the biotech-verse as CymaBay Therapeutics Inc (NASDAQ:CBAY) shot up on back of H.C. Wainwright’s upgrade and Regulus Therapeutics Inc (NASDAQ:RGLS) crashed under FDA’s extended clinical hold of its key HCV program.
Analysts are weighing in with converse takes, considering one sees reason to step away from the sidelines in CBAY’s favor, but another moves to the cautious spectrum after the FDA setback.
Let’s dive in:
H.C. Wainwright Sees New Buying Opportunity in CymbaBay Therapeutics
CymaBay stock is rising nearly 13% after H.C. Wainwright analyst Ed Arce has become bullish on its prospects, upgrading from a Neutral to a Buy rating while boosting the price target from $2.50 to $6, which represents a 219% increase from where the shares last closed.
Arce explains his new confident stance on the biotech firm, elaborating, “Our positive outlook on the shares is driven by two major factors: 1) potential aggregate milestone payments totaling up to $200M from Kowa (Japan), CymaBay’s new U.S. partner for arhalofenate (gout), which we initially did not incorporate into our model when the agreement was announced earlier this month, and 2) a more positive view of the potential of MBX-8025 to treat PBC in the ongoing open-label, dose ranging Phase 2 study.”
Why else has the analyst become more confident on CymaBay shares? The analyst points to the firm’s drug candidate seladelpar for primary biliary cholangitis (PBC), considering biliary biology coupled with biomarker evidence he sees as “substantial.”
“We believe the treatment effect seen with 50mg and 200mg doses of seladelpar point to a flat dose response curve, such that the ALP efficacy may still be equivalent (or similar) at the 25mg, 10mg and even 5mg doses currently being evaluated. In addition, we believe the prior effects seen with the biomarkers GGT, bilirubin and C4 all point to a benign liver safety profile, such that the prior ALT elevations seen in the prior study may well just be one-time, transient ‘flares’ experienced only upon initiation,” Arce surmises.
With added financial value stemming from Kowa and a likely FDA green light come fourth quarter of 2020 for arhalofenate, designed as an anti-inflammatory uricosuric drug that reduces the risk of gout flares while also lowering sUA, the analyst sees multi-million dollar milestones ahead. One for when the Phase 3 trial is initiated in third quarter ($10 million milestone), one when the top-line data readout surfaces in third quarter of 2019 ($50 million milestone), and $20 million once the drug garners FDA approval.
Looking ahead, Arce expects peak sales to circle $925 million in 2032 if the domestic commercial launch hits in early 2021, which would gain $143 million in royalties for the firm. As far as probability of milestone success, the analyst predicts 40% for all milestones.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Ed Arce is ranked #759 out of 4,378 analysts. Arce has a 37% success rate and gains 8.4% in his yearly returns. However, when recommending CBAY, Arce forfeits 30.2% in average profits on the stock.
TipRanks analytics exhibit CBAY as a Buy. Based on two analysts polled by TipRanks in the last 3 months, 1 rates a Buy on CBAY while 1 maintains a Hold. The 12-month average price target stands at $4.25, marking a nearly 134% upside from where the stock is currently trading.
Regulus Therapeutics Stock Crumbles Under Weight of FDA Clinical Hold; AstraZeneca Collaboration Could Help Stock Rebound
Regulus shares are plummeting 50% after the biotech firm revealed Friday after market close that the FDA is extending its clinical hold on RG-101, an investigational treatment of chronic hepatitis C virus infection, needing additional long-term clinical data from ongoing studies.
Considering the data the agency seeks is not due until the fourth quarter of this year, Needham analyst Alan Carr has cut the HCV program from his model on back of what he deems an “extensive development risk.” Accordingly, the analyst downgrades from a Buy to a Hold rating on shares of RGLS without listing a price target.
Carr opines, “We’ve removed the program from our model considering extensive development risk. Regardless, opportunity for RGLS to capture value in HCV is fading in our view given growing number of effective once-daily oral options. Though we believe microRNA platform has substantial potential, we are downgrading to HOLD due to absence of near-term material clinical milestones. A key value-creating milestone in our view is top-line results from Phase 2 proof-of-concept trial of RG-012 in Alport Syndrome. This trial is expected to begin mid-2017, with results available in 2018. Data from RG-125 Phase 2 trial in NAFLD (collaborator AstraZeneca) are expected 3Q17.”
This study could be significant for RGLS and be the key to inciting confidence in the stock once again. “Collaborator AstraZeneca is expected to complete a Phase 2 trial of RG-125 in NAFLD in 3Q17. A positive outcome may have a favorable impact on the stock and restore investor interest in microRNA platform,” Carr asserts.
Additionally, last month during an R&D day, the firm announced two new preclinical candidates: RGLS5040 miR-27 inhibitor for Cholestatic Disease and RGLS4326 miR-17 inhibitor for Autosomal Dominant Polycystic Kidney Disease. Though the analyst awaits further data-read outs and time into the Phase 1 and Phase II trials for these drugs, he notes IND submissions are anticipated by the second half of this year; programs, which Carr believes “add important depth to company pipeline […]”
RGLS closed its third quarter with $91.7 million in cash, a dip from $108.0 million it had at the end of the second quarter of 2016. Yet, Carr anticipates this will be “sufficient” to carry the company into 2018, once the company reigns in operating expenses for this year.
According to TipRanks, five-star ranked Alan Carr is ranked #383 out of 4,378 analysts. Carr has a 45% success rate and realizes 9.7% in his annual returns. However, when recommending RGLS, Carr loses 24.6% in average profits on the stock.
TipRanks analytics demonstrate RGLS as a Buy. Out of 7 analysts polled by TipRanks in the last 3 months, 3 are bullish on Regulus stock and 4 remain sidelined. With a return potential of 629%, the stock’s consensus target stands at $8.75.