Biotechnology is a tough business. Just ask Versartis Inc (NASDAQ:VSAR), which announced today that its VELOCITY Phase 3 clinical trial of somavaratan in pediatric growth hormone deficiency (GHD) failed to meet its primary endpoint of non-inferiority. However, as somavaratan is no longer a threat, Ascendis Pharma A/S (NASDAQ:ASND) is flying high on hopes for its GHD treatment TC-hGH.
In light of the clinical setback, Cantor analyst Elemer Piros reiterated an Overweight rating on Versartis shares, while slashing the price target to $14 (from $34), which represents a potential upside of over 300% from where the stock is currently trading. (To watch Piros’ track record, click here)
Piros commented, “Based on these available data, we believe a potential path forward could include increasing the dose and frequency (weekly administration) of the drug. However, conducting an additional pivotal trial at a modified dose/frequency would delay the timing of commercialization and potentially diminish the company’s advantage over competitor Ascendis. We now ascribe an adjusted 55% probability of success for somavaratan and anticipate a more-modest and delayed commercial launch. We expect greater clarity on the company’s plans moving forward over the coming weeks, following further analysis of the VELOCITY data.”
“Following these data, we are lowering our probability of success for Versartis’s pediatric GHD programs to 55% from 70%. We believe VELOCITY data confirm the activity of somavaratan, but indicate the need for optimization on potentially dose and frequency. We have conservatively adjusted our expectations for the commercial launch to begin in 2021 instead of 2019, and lowered our peak penetration rate to 20% from 30% in pediatric markets. In addition, we have rolled forward our NPV to 2018 to reflect our 12-month time horizon for the shares,” the analyst continued.
Out of the 5 analysts polled in the past 3 months, 2 rate Versartis stock a Buy, while 3 rate the stock a Hold. With a return potential of 550%, the stock’s consensus target price stands at $21.
Wedbush analyst Liana Moussatos took the other route, raising her price target for Ascendis shares from $36 to $65, while reiterating an Outperform rating on the stock. (To watch Moussatos’ track record, click here)
Moussatos opined, “Due to reduced competition, we increased our penetration for TChGH in the U.S. from 40% to 60%, EU to 40% from 28% and RoW to 25% from 18%.”
“Ascendis leverages the TransCon drug delivery platform to improve compliance and clinical profiles of drug candidates for patients with rare diseases. In our view, the main focus for investors is TransCon human Growth Hormone (TC-hGH); however, two new TransCon product candidates are entering the clinic in 2017 and in early 2018—TransCon parathyroid hormone (TC-PTH) for hypoparathyroidism and TransCon C-Type Natriuretic Peptide (TC-CNP) for achondroplasia, respectively,” the analyst added.
Out of the 5 analysts polled in the past 12 months, 4 are bullish on Ascendis Pharma stock, while 1 remains sidelined on the stock. With a return potential of 48%, the stock’s consensus target price stands at $41.