Mara Goldstein Steps to the Sidelines on Ignyta Inc (RXDX) But Boosts Price Target Following Billion-Dollar Acquisition by Roche

Cantor's Mara Goldstein believes the valuation of the $1.7 billion takeover by Roche is sound, and does not think another bid for RXDX is forthcoming.

Now that Swiss healthcare giant Roche is set to acquire Ignyta Inc (NASDAQ:RXDX), likely enticed by RXDX’s cancer pipeline, and lead asset entrectinib, an investigational drug with preliminary antitumor activity, Cantor analyst Mara Goldstein believes the $1.7 billion deal is reasonably valued.

Now that the all-cash transaction is coming to a close, the analyst is stepping to the sidelines, downgrading from Overweight to a Neutral rating on RXDX stock, but lifting the price target from $23 to $27. (To watch Goldstein’s track record, click here)

“While it is not so aggressive, in our view, to rule out the possibility of another bid, we do not think it likely,” adds the analyst. The terms of the deal indicate a 74% premium to RXDX’s last closing price of $15.55 before the deal was announced, and a 17% premium of Goldstein’s former price target of $23.

One thing is clear to Goldstein: Ignyta’s selective tyrosine kinase inhibitor (TKI) candidate entrectinib is the “driver.” Goldstein notes, “With strong positive interim data from the ROS1 arm of the STARTRK-2 study, we think that the value of entrectinib as a targeted therapy for ROS1 and NTRK fusions support the rationale for a combination, particularly given data in patients with brain metastases, as it suggests a differentiated and potentially best-in-class profile. The company does have other pipeline candidates, but entrectinib has been the major value driver for the shares.”

Looking ahead, the analyst looks forward to data coming in the new year, anticipating a top line data read-out from the STARTRK-2 ‘s NTRK arm in the first half of 2018, maybe even in the early days, with a full data set from the ROS1 arm likely due later in the year.

“We do not see the potential for data disclosure to disrupt the transaction, given data observed thus far and Breakthrough and Priority Medicines (PRIME) designation from the FDA and EMA, respectively, for NTRK fusion-positive solid tumors, and the ROS1 data itself,” Goldstein surmises.

TipRanks highlights a mostly cautious analyst consensus on the Street when it comes to Ignyta’s market opportunity, with 4 out of 5 analysts polled in the last 3 months remaining on the sidelines and just 1 bullish on RXDX stock. With a loss potential of 5%, the stock’s consensus target price stands at $25.25.

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