BMO, Oppenheimer Out Bullish On Constellation Pharma's Cancer Treatment Opportunity

The development-stage biotechnology company Constellation Pharmaceuticals, Inc. CNST uses protein interaction to treat myelofibrosis, in addition to addressing prostate cancer and other tumors.

The Analysts

Oppenheimer analyst Leah Rush Cann initiated coverage of Constellation with an Outperform rating $21 price target.

BMO Capital Markets analyst Do Kim initiated coverage of Constellation with an Outperform rating and $19 price target.  

The Thesis

Constellation is in the experimental stage of clinical trials for indications such as prostate cancer and myelofibrosis, Oppenheimer's Rush Cann said in a note. 

“CPI-1205, for prostate cancer, is a small molecule designed to promote anti-tumor activity by specifically inhibiting EZH2. CPI-0610, which addresses myelofibrosis, is a small molecule inhibitor of BET. These compounds are currently being evaluated in Phase II clinical trials,” the analyst said.  

Due to the company’s development stage, valuations will focus mainly on potential future revenue in the next six years, Rush Cann said. The analyst estimates that the treatments could have sales by 2023, resulting in potential 2025 product sales of $1.84 billion for CPI-1205 and $249.2 million for CPI-0610.

In the past two years, Constellation's business expenses increased from $27.9 million to $47 million, while operating losses rose from $33.7 million to $59.8 million.

BMO's Kim said Phase 1b of the ProSTAR study should be completed this year, and data from this study alone could support the sell-side firm's $19 price target.

The market for advanced prostate cancer treatments is estimated at $6.3 billion, the analyst said. 

“We believe EZH2 inhibition could overcome tumor immune resistance when combined with checkpoints. Positive ORIOn-E data is upside to our estimates,” Kim said.

Insufficient responses, an increase in competitive therapies and a halt in development are the main risks to BMO's valuation, the analyst said. 

Price Action

Constellation shares were down trading down 2.84 percent to $9.57 at the time of publication Monday. 

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