Tesaro (TSRO) Risk-Reward May Not be Favorable But Stock Has Upside Drivers, Says RBC; Analyst Maintains 'Outperform'
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RBC Capital maintained an Outperform rating on Tesaro (NASDAQ: TSRO) with a price target of $122. Analyst Adnan Butt said risk-reward may not be favorable, but he noted upside drivers for the stock.
"Risk-reward on TSRO may not be favorable here; however, the story is more de-risked and compelling post NOVA data with a blockbuster drug and a company that could be acquired. We think ESMO details and competitor read-outs could both take shares higher in 2016 and 2017 as they should either support the already positive hypothesis on PARP inhibitors or make niraparib’s case stronger," said Butt.
"Data from the Phase 3 NOVA study top-lined were impressive and will likely not disappoint. The focus will first be on seeing that the gBRCAmut, sBRCAmut and HRD + populations are an established target and second if there is any compelling benefit in biomarker negative patients, which could be the upside driver," continued the analyst.
"We think NOVA data alone justify niraparib being a $1B+ drug in the second-line maintenance setting; however, first-line maintenance could make this a $2B+ drug, in our view. Previously, TSRO predicted that the total addressable market in ovarian cancer could be $4B+ but after the better-than-expected NOVA data seen we believe this outdated total based on old assumptions should go up, maybe by 50% or more," added Butt.
On competitor data, the analyst said, "A number of competitor Phase 3 breast cancer studies could read out in 2016 and one ovarian cancer treatment study; however, these read-throughs could be positive, and then maintenance data from competitors is further out with olaparib second-line in 2H:16 and firstline in 2H:17 (see news flow tables on page 3) and possibly rucaparib maintenance in 2017 as well. Should data not be as compelling as TSRO’s those are also upside drivers."
Shares of Tesaro closed at $99.09 yesterday.
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