Maxim Group Starts Onconova Therapeutics (ONTX) at Buy
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Maxim Group initiates coverage on Onconova Therapeutics (NASDAQ: ONTX) with a Buy rating and a price target of $6.00.
Analyst Jason McCarthy highlighted:
- Rigosertib is currently in a pivotal phase III study ("INSPIRE", N=225) for the treatment of high-risk MDS (Myelodysplastic Syndromes), a hematological malignancy resulting in bone marrow failure (data 2018).
- Third time's the charm. Rigosertib has been previously evaluated in two prior phase III studies which identified a sub-population in high-risk patients where the drug was highly effective (p=0.0008) - Overall Survival (OS). As such, we see a positive skew in the current pivotal trial. We note that the company, with >$25M in cash, is funded through data.
- The opportunity. 10,000 patients have high-risk MDS and essentially no options, thus a launch trajectory could be steep. SOC hypomethylating agents (HMAs) that fail cost $70K per patient. Pricing for Rigosertib would likely be higher, suggesting a significant market opportunity.
- Onconova is a value play for investors. With lessons learned, the company has de-risked the pivotal INSPIRE study with the right patient population and powering. Part of the novel design includes approval on OS in either of two populations embedded in a single trial: 1) a P-value in the ITT population, or 2) a P-value in the "very high risk" population. Either of which (or both, in the best case scenario) warrants approval.
- In addition, an oral formulation of Rigosertib in combination with SOC in the front-line setting has shown promising interim data and the complete data (near-term catalyst) is coming at ASH (December 2016), which sets the stage for a pivotal study, potentially starting in 1H17.
- Conclusion. Onconova is a phase III company trading at a "distressed" (~$10M) valuation. The disconnect between the disappointment over prior trial failures and the current intelligent trial design creates a great opportunity for data-centric biotechnology investors. The data and market opportunity (an unmet medical need) create a positive risk/reward scenario for investors.
Shares of Onconova Therapeutics closed at $3.27 yesterday.
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