Biotechnology companies are kicking of pipeline trials for 2016. Analysts weigh in on Merrimack Pharmaceuticals Inc (NASDAQ:MACK) and Egalet Corp (NASDAQ:EGLT) in light of the companies’ drugs for cancer therapies and opioid addiction, respectively. Below is a summary of what to watch for both companies.
Merrimack Pharmaceuticals Inc
Today, Brean Capital analyst Jonathan Aschoff maintained a Buy rating on Merrimack Pharmaceuticals with a target price of $16 after a meeting with the company’s management. Onivyde, the company’s drug used to treat pancreatic cancer, was added to the European Society for Medical Oncology guidelines despite not yet receiving approval from the European Medicines Agency. The analyst believes, “Success in the ongoing front-line pancreatic cancer trial would expand that market to about 49,000 patients.”
MM-302, a pipeline breast cancer therapy, is the second most likely Merrimack drug to be approved and commercialized according to Aschoff. While the trial is still in the planning stages, an ongoing phase 2 trial in breast cancer patients and should provide results in 2017. If the trials go well, the company can expect to see support for accelerated approval.
Following MM-302, Merrimack’s third contender for EMA approval, MM-121, is currently being tested for cancer treatment with trial results expected to be released in 2018. The analyst elaborates, “Even though the drug was returned to Merrimack by ex-partner Sanofi, it was not used exclusively in HRG+ patients, where it has the most benefit, and Merrimack’s pivotal trial should therefore have a much better chance of success, given the existing positive data in HRG+ patients.”
Aschoff estimates that Merrimack ended 2015 with $182M in cash, which he believes will be enough to drive the company through to profitability in 2018 by the estimates. Merrimack will also likely be receiving $46.5M in net milestone payments over 2016 due to regulatory approvals and trial initiation.
Both analysts polled by TipRanks in the last 3 months are also bullish on the stock with an average 12-month price target of $14, marking a 117% potential upside from current levels.
According to TipRanks.com Jonathan Aschoff has a yearly average loss of -11.2% and a 33% success rate. Aschoff is ranked #3,568 out of 3,682 analysts.
Chiara Russo of Cantor Fitzgerald is bullish on Egalet Corp after a management meeting at which the company hit on all the “sweet spots;” product, pipeline, and cash. The company currently has $169M in cash, which Russo believes will cover the operational needs, although the potential approval of Arymo, its lead pipeline candidate, by year end could lead management to return to the capital markets in 2H:16 to strengthen the franchise infrastructure. The biotech company has two commercial products that support the analyst’s positive outlook; Arymo and Egalet-002.
Arymo is an opioid abuse-deterrent and the analyst expects it to gain FDA approval by the end of 2016. The drug is expected to be a strong product that will add value to the company’s commercial offerings. Additionally Egalet is leveraging their “Guardian technology” from Arymo to develop another drug called Egalet-002, currently in Phase 3 testing. With the Opioid crisis continuing to grow, the FDA’s focus on combative drugs is a “step in the right direction as Russo believes “the Guardian technology to be best-in-class and differentiating in the marketplace.”
While Egalet can generate revenue through commercial products, the bulk of the valuation is based on FDA approval and commercialization of their opioid formulations. The current commercial landscape is saturated with opioid pain therapies in both standard formulations and abuse-deterrent treatments. Further, Egalet does not have in-house manufacturing but rather relies on third party suppliers. An interruption at any of the third party facilities could negatively impact the commercialization of the company’s products.
As a result of these developments, Russo maintained a Buy rating on Egalet Corp with a price target of $22.
According to TipRanks.com, analyst Chiara Russo has a yearly average loss of -14.5% and a 23% success rate. Russo is ranked #3,371 out of 3,682 analysts.