Ultragenyx Pharmaceutical Inc (RARE) Tumbles on Ace-ER Failure; Top Analyst Remains Bullish

Cowen Sees Light at the End of the Tunnel for Ultragenyx Following a Failed Phase 3 Study in GNEM

Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) shares are tumbling nearly 10% in after-hours trading Tuesday, after the drug maker announced that its Phase 3 study evaluating aceneuramic acid extended release (Ace-ER) in patients with GNE Myopathy (GNEM) did not achieve its primary endpoint of demonstrating a statistically significant difference in the upper extremity muscle strength composite score compared to placebo.

However, Cowen’s top analyst Eric Schmidt still sees Ultragenyx shares as attractive based largely upon the potential of burosumab in X-linked hypophosphatemia (XLH). As such, the analyst reiterates an Outperform rating on the stock, without suggesting a price target.

Schmidt wrote, “We have long viewed the Ace-ER program in GNEM as higher risk based upon Phase II data that were less than compelling. More importantly, our interactions with investors suggested little interest in this program. In addition, we viewed this indication as having modest (~$200MM) sales potential. Nonetheless, today’s news is unwelcome as it comes on the heels of negative data on triheptanoin in Glut1 deficiency syndrome, and is likely to elicit criticism from bears about the company’s clinical execution capabilities. Hence RARE shares could trade down more on today’s news than might otherwise be viewed as justifiable.”

“While the company will need to replenish its pipeline of clinical stage assets and restore a bit of investor confidence, we believe these are relatively easy things to accomplish, and expect continued progress on burosumab (a de-risked drug with $1.5B sales potential shared with KHK) to help a great deal in this regard. Hence we recommend investors buy into the stock weakness around this event,” the analyst concluded.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Eric Schmidt has a yearly average return of 33.1% and a 60% success rate. Schmidt has a 1.5% average return when recommending RARE, and is ranked #25 out of 4608 analysts.

Out of the 19 analysts polled in the past 12 months, 11 rate Ultragenyx stock a Buy, 7 rate the stock a Hold and 1 recommends a Sell. With a return potential of 40%, the stock’s consensus target price stands at $82.59.


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