Cowen Remains Sidelined on Two Pharma Stocks: Sarepta Therapeutics Inc. (SRPT) and XOMA Corp. (XOMA)

In light of recent earnings from Sarepta Therapeutics Inc. (NASDAQ:SRPT) and XOMA Corp. (NASDAQ:XOMA), analysts at Cowen highlight pipeline updates and significant transactions in both companies.

Sarepta Therapeutics Inc.

Last week, Sarepta Therapeutics reported disappointing earnings for 3Q15. Following the announcement, analyst Ritu Baral from Cowen weighed in on the stock with a Market Perform rating without assigning a specific price target.

Talking about the financials, Baral says the company’s loss per share of $(1.25) was narrower than her estimates of $(1.65), but lower than consensus estimates of $(1.17). For the quarter, the company reported a net loss of $51.9 million and cash of $111.4 million.

Baral is looking forward to the outcome of SRPT’s eteplirsen, which is currently under FDA review. Eteplirsen is the company’s lead drug for Duchenne muscular dystrophy (DMD). The New Drug Application for eteplirse will be reviewed by January 22. Baral will also be looking forward to the outcome of drisapersen, another DMD treatment that will compete with a drug from BioMarin Pharmaceutical. The FDA will make a decision on drisapersen’s NDA by December 27.

Baral feels since the outcome for eteplirsen is scheduled for a later date than drisapersen, Sarepta will be able to get valuable insights into the perspective of the FDA. This in turn should help SRPT in preparing for its meeting with the FDA advisory committee.

According to Baral, the FDA is under pressure from the patient group to approve at least one of the two DMD drugs; eteplirsen or drisapersen. Many believe the agency will approve only one of the two. In this light, Baral says, “We, however, believe approvals may not be a zero sum game: that DMD patient groups will advocate for etep approval regardless of drisa’s approval status and FDA will treat both NDAs equally. As such, we think the likeliest outcome is that both drugs will be approved in 1H16, and anticipate an even market share split if both drugs were approved within 6 months of each other.”

Out of 9 ratings for SRPT’s stock, Baral has a success rate of 57% with an average return on stock of 6.9%. Out of 11 analysts polled by TipRanks who have recently rated SRPT’s stock, 10 have rated it as Buy and 1 has rated it as Hold; none of the analysts are bearish on the stock. The average consensus price target for the stock is $49.90, an upside of $100% over where the stock last closed.

SRPT consensus

XOMA Corp.

Cowen analyst Phil Nadeau took an in-depth look at the recent earnings and fundamentals of XOMA and came out with a few insights. The analyst reiterated a Market Perform rating without assigning a price target.

In his report, Nadeau points out the company ended the quarter with $32 million in cash, not including $37 million received from Novartis in October. As part of the deal, XOMA had outlicensed a cancer antibody to its longtime partner Novartis. Nadeau says, “With the Novartis partnership and the divesture of its biologics manufacturing and biodefense programs, XOMA has completed its transition into an endocrinology-focused biotech.”

The analyst noted that the company is funded through the end of the first quarter of 2017. Apart from the Novartis deal, these transactions include extending the maturity of its $13.5 million note due to Novartis until the end of September, 2020. These transactions also include the sale of the company’s biologics manufacturing facility to Aegenus, which should bring cash of $5 million. Nadeau says, “Through these three deals XOMA has improved its cash runway by $55.5MM, and management estimates current resources will fund operations through Q1:2017.” By that time, the company hopes to make progress on some of its key ongoing trials.

Aside from the sale of biologics manufacturing facility, Nadeau also highlights another transaction: the company’s announcement to divest its biodefense program to Nanotherapeutics. Referring to the impact of these transactions, Nadeau reiterates, “These divestures, combined with a corporate reorganization, have trimmed XOMA’s headcount by 50% and has transformed XOMA into an endocrinology-focused biotech.”

Phil Nadeau has an overall success rate of 64% with an average return per recommendation of 16.6%. Out of 2 analysts polled by TipRanks who have recently rated XOMA’s stock, 1 has rated it as Buy and 1 has rated it as Hold. The average consensus price target for the stock is $1.50, an upside of 21.95% over where the stock last closed.

XOMA consensus



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