Market Overview

Chardan: Sell Axovant Sciences, RVT-101 Market Pricing Is 'Highly Irrational'


In a report published Thursday, Chardan Capital analyst Gbola Amusa initiated coverage of Axovant Sciences Ltd (NYSE: AXON) with a Sell rating and $10 price target. The analyst expressed concerns regarding the company's candidate, RVT-101 being overpriced, following Axovant's successful IPO.

"On 11 June, Axovant achieved what is understood by some to be the biggest biotech IPO in the past 20 years, with the market cap surging to the $2-3 billion range after AXON achieved $293 million in proceeds from its IPO," the Chardan report said.

Axovant had bought RVT-101 from GlaxoSmithKline plc (ADR) (NYSE: GSK) in December 2014 for upfront cash worth $5 million. However, the analyst expects the company's shares to underperform until there is more visibility into RVT-101's profile and competitiveness.

"The market pricing of RVT-101 at IPO to us was highly irrational and suggests underperformance for Axovant. We believe it unlikely Axovant was able to acquire a would-be blockbuster entering phase III trials for just $5 million up front, plus milestones and 12.5% royalties. As a general rule, the more valuable a pipeline asset is, the more a company has to pay up front to obtain it," Amusa explained.

According to the Chardan report, some of the more successful companies conduct due diligent on any asset across the world that enters Phase III development. If it is assumed that such due diligence would have been conducted on RVT-101, it seems highly unlikely that GlaxoSmithKline would have sold a valuable asset for a mere $5 million up front, "even if GSK were in the process of de-prioritizing its CSN franchise."

Latest Ratings for AXON

Dec 2018JefferiesUpgradesHoldBuy
Jan 2018Cowen & Co.DowngradesOutperformMarket Perform
Jan 2018Chardan CapitalUpgradesSellNeutral

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