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Raymond James Thinks Magenta Still Has Upside

- By Barry Cohen

If a Raymond James analyst is right, Magenta Therapeutics (MGTA) still has upside potential.

The investment banking firm's Diane Leone has initiated coverage of the company with an Outperform rating and set a target price of $22, according The Fly. That's 19% higher than where the stock is currently trading. And it comes on top of a more than doubling of the company's share price year to date.


Leone has a number of reasons for liking the company's prospects. Among them is its cell therapy, called MGTA-456, which is designed to address the side effects and risks -- and increase the success rate -- of bone barrow transplants for autoimmune diseases, blood cancers and rare genetic diseases. Magenta intends to enroll 12 patients in the ongoing Phase 2 study for people with metabolic disorders. The company claims it is the only firm working on the major barriers to stem cell transplant and gene therapy.

Bone marrow is the spongy, greasy tissue present in the bone cavities, according to a January report from Research Nester. Bone marrow transplants can cure many diseases by replacing damaged tissues with new ones.

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Magenta has received mixed reviews from other analyst groups. ValuEngine cut the company from a buy to a hold in a research note in early January, according to a recent article in the Fairfield Current. Meanwhile, Zacks boosted Magenta to a hold from a sell in late December.

One major institutional investor is highly confident about the company's prospects. Casdin Capital LLC raised its holdings in Cambridge, Massachusetts-based Magenta by more than 17% in the fourth quarter of 2018. Magenta now makes up 2.6% of Casdin's holdings, making the stock its 17th largest position.

The global market for bone marrow transplants is growing due in great part to the rising incidence of cancers and anemia. Other driving factors include technological advances and better health care infrastructure. But cost of the treatment is an issue, as is the shortage of qualified bone marrow donors.

It's expected that Europe will continue to lead the bone marrow transplant market, given its wealth of established transplant centers.

Investors should be encouraged that the company is led by two seasoned pharma and biotech executives. Jason Gardner is CEO, president and co-founder of the company. He previously established and ran the GlaxoSmithKline (GSK) R&D satellite facility in Boston. A year ago John Davis M.D. joined the firm as chief medical officer. He was previously a senior vice president and head of early clinical development at Pfizer (PFE).

In the fourth quarter of 2018, Magenta's net loss doubled from the same period a year earlier, to $16.7 million. Cash, cash equivalents and marketable securities as of December 31 were $142.6 million compared to $51.4 million a year earlier. The increase was primarily the result of net proceeds from the $52.2 million Series C preferred stock financing completed in April 2018, and net proceeds of $89.9 million from Magenta's IPO completed in June 2018.

Disclosure: The author holds no positions in any of the company's mentioned.

This article first appeared on GuruFocus.