Mirati Target Lowered From $41 To $27 By Barclays, Overweight Maintained

Barclays lowered its price target on Mirati Therapeutics, Inc. MRTX as the company suffered a setback for lead drug. The expected update for Phase 1b trial for lead drug, glesatinib, in MET positive lung cancer was a clear disappointment with a response rate in Ph2 target patients falling below its expectations of 40–55 percent. The brokerage has maintained its Overweight rating on the stock.

Barclays analyst Jonathan Eckard said while the drug was active with ~90 percent of patients having tumor reductions, tolerability issues with the old formulations caused broad dose interruptions or reductions dampening the overall efficacy. The analyst added that early experience with the "new" formulations seems to cut these issues. However, regaining full confidence from investor might require an update with enhanced efficacy data.

The brokerage said there existed increased risks until an update is provided by fresh study. Therefore, it reduced its price objective to $27 from $41. While stating the update was bad, Eckard said he didn't believe worth walking away. He pointed out the notable tumor reductions in nine/ten target in phase 2. He said early tolerability of the new formulation appears much better and an update could lighten some concerns.

The analyst believes it could be premature to write off the drug fully. He said, "Based on this update, we are reducing our POS (%) for glesatinib and increasing our discount rate used in our sum-of-parts valuation to reflect the increased risk to the stock."

Shares of the company traded 42.8 percent down on Monday.