SunTrust Reiterates Buy On Achaogen, Sees Plazomicin As An 'Undervalued Asset'

SunTrust Robinson Humphrey reiterated its Buy rating on Achaogen Inc AKAO and kept a price target of $10 on shares. This implied a potential upside reward of about 130 percent from the current levels.

Analysts Edward Nash and Yun Zhongwere convinced about the company's deep undervaluation following their meeting with the company's senior management. They pointed out the promising late-stage asset that targets unmet medical requirements.

The brokerage sees a 75 percent chance of success for Achaogen's ongoing third phase program of Plazomicin for CUTI. Incidentally, the company is predicted to disclose top-line data in the first quarter of 2017 as it just completed the enrollment of patients.

"Management attributed the fast patient enrollment in the EPIC study to the active comparator meropenem, which is considered to be the gold standard of treatment for cUTI. The current guidelines for cUTI recommend empiric therapy with a carbapenem until definitive therapy can be chosen," analysts opined in their note.

Therefore, physicians were ready to randomize patients in the trial. The brokerage believes that there is 15 percent non-inferiority margin providing some cushion for the EPIC trial to be a success.