Brean Sees 200+% Upside In Shares Of Evoke Pharma

In a report published Thursday, Brean Capital analyst Difei Yang initiated coverage of Evoke Pharma Inc (NASDAQ: EVOK) with a Buy rating and a price target of $13.

Evoke Pharma's single drug candidate EVK-001 is an intranasal formulation of metoclopramide for the treatment of gastroparesis. Noting that oral metoclopramide was already being used for treating gastroparesis, Yang mentioned that EVK-001 was merely a new means of delivering an existing molecule, and thus a "de-risked asset."

Since EVK-001 does not carry the same R&D risks associated with the development of novel drug molecules, Evoke Pharma is well positioned for a likely Phase III approval. "The completed Phase IIb trial on EVK-001 with 287 patients had positive results in the targeted patient population, further lowering the risk of failure of the ongoing Phase III trial," Yang said.

Besides mitigating the negative side effects of oral metoclopramide, EVK-001 also improved efficacy by bypassing the dysfunctional gastrointestinal tract through its intranasal delivery mechanism. "We believe that the probability of success of the ongoing Phase III trial is high and that the current share price does not reflect this upside," Yang wrote.

In case of an FDA approval for EVK-001, Evoke Pharma's shares could be valued at around $20, the Brean Capital report mentioned.

Yang believes that there was significant market potential for EVK-001 and expects the treatment to eventually gain a 10 percent market share, translating to $132 million in revenues in the fifth year of its launch.