Cowen Slashes Price Target on Tesaro (TSRO) Stock on Back of Disappointing Guidance

Tesaro (NASDAQ:TSRO) investors got cold feet today, sending shares tumbling nearly 24%. The reason? The company reduced its 2018 revenue guidance to a $250-$265 million range from the prior guidance of $310-$345 million, compared to consensus estimates of $263.6 million.

Cowen analyst Boris Peaker believes that the reduction reflects the difficulty of changing the practices of community docs. The analyst noted, “This is consistent with our market research where docs expressed lack of urgency in treating non-BRCA mutant patients with PARPi despite broad BRCAindependent approvals for PARPi drug.”

As such, Peaker lowers his price target on TSRO to $38 (from $52), while reiterating a Market Perform rating on the stock. (To watch Peaker’s track record, click here)

Peaker added, “We’ve reduced our Zejula sales estimates from $257MM, $409MM and $634MM to $229MM, $339MM, and $527MM in 2018, 2019, and 2020, respectively. This is the key driver of our price target decrease from $52/share to $38/share. Despite the multiple upcoming clinical catalysts, we believe that over the next 12-18 months investor focus will remain on Zejula sales with the likely approval of Lynparza in frontline maintenance for BRCA+ ovarian cancer creating a further overhang for TSRO shares. Our new price target includes a $35/share NPV for Zejula and $3/share for the rest of the pipeline.”

Furthermore, Peaker believes an additional financing and/or restructuring will be necessary in late ’18/’19, which will remain an overhang on TSRO shares.

Overall, TipRanks suggests optimism with some caution baked into expectations when it comes to Wall Street’s majority perspective on Tesaro. Out of 11 analysts polled in the last 3 months, analysts are split between the bulls and the sidelined on TSRO: 6 rate a Buy on the healthcare stock while 5 maintain a Hold. However, the 12-month average price target stands at $58.73, marking nearly 118% in upside potential from where the stock is currently trading.

Tesaro is an oncology-focused biopharmaceutical company dedicated to improving the lives of cancer patients by acquiring, developing and commercializing safer and more effective therapeutics.


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