Market Overview

Eeny, Meeny, Miny, Moe: JPMorgan Downgrades 4 Biotechs In Portfolio Rebalancing

Share:
Eeny, Meeny, Miny, Moe: JPMorgan Downgrades 4 Biotechs In Portfolio Rebalancing
Related
The Daily Biotech Pulse: Puma Aces Late-Stage Trial, Chinese Cheer For FibroGen, J&J $5B Buyback Plan
The Daily Biotech Pulse: Mylan Recalls Blood Pressure Drug, Heat Biologics Offering, New Novelion CEO
Related NVAX
52 Biggest Movers From Yesterday
Benzinga's Top Upgrades, Downgrades For December 11, 2018
Best Stock Charts - S&P 500 Technical Breakdown? (TalkMarkets)

JPMorgan is generally bullish on biotech and in most cases sees opportunity for longer-term upside, but its ratings strategy dictates the sidelining of lower conviction stocks. Here's a look at biotech companies JPMorgan turned bearish on Monday. 

The Rating

Analyst Jessica Fye downgraded Mersana Therapeutics Inc (NASDAQ: MRSN) to Neutral and Novavax, Inc. (NASDAQ: NVAX) to Underweight.

Anupam Rama downgraded Ophthotech Corp (NASDAQ: OPHT) and Otonomy Inc (NASDAQ: OTIC) to Underweight.

The Thesis

The downgraded stocks have “compelling yet early-stage pipelines," according to JPMorgan. 

“Indeed, the combination of continued innovation, a constructive FDA, ready access to capital markets, and potential (yet unpredictable) momentum on M&A tailwind presents a compelling setup for the sector as a whole,” the analysts said in a Monday note.

Not all of the stocks have coming catalysts.

Fye said she considers Mersana’s platform attractive but does not expect any stock-driving activity in 2018. JPMorgan lowered its price target for Mersana from $23 to $19 on anticipated delay in XMT-1522 dose escalation to 2019.

Novavax suffers a “precarious” financial position with net debt as management advances its earlier-stage flu programs, the analyst said. Fye sees risk that the company’s next catalyzing candidate NanoFlu may need an efficacy trial for approval, and she sees share recovery as being dependent on positive Phase 3 data for RSV maternal immunization expected in 2019.

Ophthotech is not expected to release clinical data until the end of 2018, but “it will take definitive proof-of-concept data to ascribe credit to the Zimura franchise overall,” Rama said. The analyst forecast underperformance relative to the rest of JPMorgan’s coverage universe.

Otonomy was downgraded on a lack of 2018 value drivers as the company initiates a third Phase 3 trial for Otividex and works on early-stage candidates with 2019 data.

Price Action

At the time of publication Monday, Otonomy was down 10.4 9 percent; Novavax was down 3 percent; Ophthotech was down 1.9 percent; and Mersana fell 3.5 percent. 

Related Links:

The Week Ahead In Biotech: Earnings, PDUFA Dates And More

Don't Bail On Biotech ETFs: 'There Are Several Reasons Why The Sector Took A Breather'

Latest Ratings for MRSN

DateFirmActionFromTo
Jul 2018Leerink SwannDowngradesOverweightMarket Perform
May 2018BairdInitiates Coverage OnOutperform
Mar 2018JP MorganMaintainsNeutralNeutral

View More Analyst Ratings for MRSN
View the Latest Analyst Ratings

Posted-In: Anupam RamaAnalyst Color Biotech Downgrades Price Target Top Stories Analyst Ratings General Best of Benzinga

 

Related Articles (NVAX + MRSN)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
DESPKeyBancInitiates Coverage On0.0
MELIKeyBancInitiates Coverage On0.0
ALBKeyBancMaintains120.0
AVNSKeyBancMaintains67.0
ABTCredit SuisseInitiates Coverage On82.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

31 Stocks Moving In Monday's Mid-Day Session

Managing Risk, Maximizing Reward With Options