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If you’re after big returns, the biotech sector is your go-to destination, although investors should proceed with caution as instead of mighty gains a portfolio can also dwindle alarmingly if a company in the highly volatile sector fails to deliver the goods.
Which is what investors evidently felt after taking in the latest news out of Mersana Therapeutics (MRSN) HQ. On Friday, shares shed about 40% of their value after the company provided a clinical trial update.
The company disclosed interim data from an expansion cohort in the early-stage study of lead candidate upifitamab rilsodotin (UpRi), earmarked as a treatment for patients with ovarian cancer.
At the lower dose, there was a complete response (CR) in 2 patients with platinum-resistant ovarian cancer. The NaPi2b high population displayed a confirmed objective response rate (ORR) of 34% and disease control rate (DCR) of 87%, while the data showed that 67% of the 73 evaluable patients exhibited reductions in target tumor lesions. One new case of Grade 5 pneumonitis was reported (adding up to a total of two cases) in a patient with significant comorbidities.
“The data showed largely consistent efficacy in NaPi2b-high patients, and notably more favorable efficacy/safety for the lower dose,” noted Baird analyst Colleen M. Kusy, who believes there is a plausible explanation for the share price drop.
“We think lower activity at the higher dose and an additional case of Gr5 pneumonitis are weighing on shares, but we remain encouraged by expansion data and continue to see a fast-to-market strategy for UpRi,” the analyst added.
Furthermore, while Kusi says an improvement in DOR (duration of response) would have been encouraging, the 5 months average duration of response is consistent with the previous update, and as such, the analyst thinks 5 months is “meaningful in this population.”
Overall, then, there’s no change to Kusy’s rating, which stays an Outperform (i.e. Buy) or price target which stays at $30, suggesting 12-month gains of a hefty 203%. (To watch Kusy’s track record, click here)
The stock’s decline adds up to previous losses and leave the shares sitting 63% into the red in 2021. But like Kusy, the rest of the Street remains firmly in Mersana’s corner. The stock’s Strong Buy consensus rating is based on Buys only - 4, in total. The average price target is almost as optimistic as the Baird analyst’s; at $29.25, the figure represents potential upside of 195% from the current trading price. (See MRSN stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.