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What’s Next for Iterum (ITRM) After Sulopenem Fails Phase 3 Trial? Top Analyst Weighs In

Should biotechs come with a volatility warning label attached? Most followers of the sector probably already know the risks involved when investing in a biotech stock; The possibility of mercurial gains is real, but a merciless drop is not out of the question, either.

The latest piece of evidence for the crushing despondence these stocks can induce: Iterum Therapeutics (ITRM). Yesterday, shares dropped 60% after the Dublin, Ireland-based company’s candidate failed to meet the primary endpoint in a clinical trial.

Specifically, the Phase 2 SURE clinical trial, which was assessing antibiotic treatment, sulopenem, in patients with complicated urinary tract infections (cUTI), saw the drug produce a weak topline result;  Sulopenem couldn’t exhibit non-inferiority to ertapenem within the FDA required 10% range by the 21-day endpoint of the trial.

According to RBC analyst Gregory Renza, the “must-win situation for sulopenem” leaves the nano-cap in a precarious position. The company exited Q1 with cash in the coffers amounting to $22 million. After talking to management, Renza said the company is now looking at “strategic alternatives,” – these include asset licensing and a company sale or merger.

Following the disappointing results, Renza now believes sulopenem has a 5% probability of success in gaining approval as a treatment for cUTI.

The 5-star analyst said, “Topline miss in the complicated UTI study is a major blow to the sulopenem pivotal program ahead of their important uncomplicated UTI trial readout, now casting uncertainty on both the asset and company… With a new level of uncertainty on pipeline viability - the trial failures, doubt now on the uUTI study readout, and the company initiating a pursuit of strategic alternatives.”

This prompted the analyst to issue a downgrade, from Outperform to Sector Perform. The lower rating comes with a significantly reduced price target, too. Down from $7 to $2, there’s still upside potential of 23% from current levels. (To watch Renza’s track record, click here)

Based on two Holds and two other Buys, Iterum has a Moderate Buy consensus rating. The average price target hits $4.75 and could provide the risk-tolerant investor with massive returns of 219%, should the figure be met in the coming months. (See Iterum price targets and analyst ratings on TipRanks)

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