Investors love biotech stocks for the lottery ticket-like returns they can offer if a company strikes medical gold. Case in point: Deciphera Pharmaceuticals (DCPH), whose shares skyrocketed nearly 80% today.
The cause of all the enthusiastic commotion? Deciphera announced positive top-line results from its pivotal Phase III study of ripretinib for the treatment of fourth-line and fourth-line plus gastrointestinal stromal tumor (GIST) patients. Specifically, ripretinib has demonstrated an impressive mPFS improvement of 6.3 months which far exceeded investor expectations of ~4 months.
The million-dollar question is whether Deciphera stock can keep up this strong rally. For Deutsche Bank analyst Konstantinos Aprilaki the answer is quite clear — the analyst sees this stock as a flower that keeps blossoming.
Despite the appreciation in shares, Aprilaki reiterates a Buy rating on DCPH, while boosting his price target to $62 (from $42). For perspective, Deciphera’s stock closed at $35.90 today, so this implies upside of more than 70%. (To watch Aprilaki's track record, click here)
Aprilaki commented, "We believe this result, coupled with the relatively clean safety profile exhibited across ripretinib clinical trials, largely de-risk the company’s planned NDA submission to the FDA in 1Q20 in the setting of advanced GIST, and thereby increase our POS in this setting from 90% to 95%. Further, we emphasize that we see positive read through to the ongoing pivotal Phase III study of ripretinib in 2L GIST (INTRIGUE), given that the active comparator in that trial, sunitinib, is associated with a mPFS of only 5.5 months; we increase our POS in this setting from 65% to 75%."
"We also adjust our estimates for predicted peak duration of treatment in both 4L and 2L GIST to reflect not only the mPFS result for INVICTUS but what we see as an increased likelihood for treatment post progression given the mOS of 15.1 months reported; 8 months and 11 months, respectively. Lastly, we increase the assumed price for ripretinib in our model from $27,500/month to $30,000/month to better reflect the value proposition we see for the asset," the analyst added.
Aprilaki is certainly not the first analyst with an optimistic outlook for this drug maker, as TipRanks analytics showcasing Deciphera stock as a Strong Buy. With an average price target of $44.80, analysts are predicting an upside of nearly 25%. In total, the stock has received 6 back-to-back 'buy' ratings in the last three months. (See DCPH's price targets and analyst ratings on TipRanks)