Deciphera Pharma Hit With Sell-Side Downgrade On Valuation After 50% Gain

Deciphera Pharmaceuticals Inc DCPH lost a sell-side bull Tuesday, with a B. Riley FBR analyst praising the company's pipeline but concluding the biotech's positives are priced into the stock.

The Analyst

B. Riley FBR's Madhu Kumar downgraded Deciphera from Buy to Neutral.

The Thesis

The early data for Deciphera's KIT/PDGFR inhibitor DCC-2618 — particularly the objective response and progression-free survival rates in later-line patients — is impressive, Kumar said in a Tuesday note. (See the analyst's track record here.) 

DCC-2618 is being evaluated for gastrointestinal stromal tumors. 

" ... DCC-2618 recently demonstrated efficacy in second-line GIST in initial data presented at the American Society of Clinical Oncology meeting, with [an] objective response rate and three-month disease control rate benefit superior to approved second-line agent Sutent from Pfizer Inc. PFE," the analyst said. 

The 50-percent appreciation in shares of Deciphera compared to flat performance by the Nasdaq Biotechnology Index over the same four-month period suggests that available efficacy data is largely priced in, Kumar said. 

B. Riley FBR forecast little additional upside potential beyond eventual Phase 3 results.

"Taken as a whole, we believe the market now largely recognizes the opportunity we had previously observed for DCC-2618 to disrupt the management of post-imatinib GIST." 

If DCC-2618 is successful in the Phase 3 INVICTUS trial for fourth-line GIST due in 2019, B. Riley FBR's outlook on the stock could improve, Kumar said: " ... It would represent the likely transition of Deciphera into a commercial biotech firm."

The Price Action

Deciphera shares have nearly doubled year-to-date.

The stock was set to open Tuesday's trading session down 4.25 percent at $42.76.

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