Applied Genetic Technologies Corp AGTC, a biotech focused on adeno-associated virus-based gene therapies for the treatment of rare diseases, reported disappointing results from an X-linked retinoschisis clinical study.
The company also confirmed Biogen Inc BIIB terminated its partnership effective March 8.
The Analysts
H.C. Wainwright & Co's Joseph Pantginis maintains a Buy rating on Applied Genetic Technologies' stock with a price target lowered from $8 to $5.75.
Wedbush's David Nierengarten maintains at Outperform, price target lowered from $12 to $11.
BMO Capital Markets' Matthew Luchini downgrades from Outperform to Market Perform, price target lowered from $13 to $5.
HC Wainwright: Here's What Happened
Applied Genetic's XLRS clinical study consisted of 27 patients. The 13 who received a high dose showed no improvements, with just two patients showing improvements in one of the four endpoints, OCT, Pantginis said in a research report. Zero pediatric patients at the middose showed efficacy at any endpoint, he said.
Given the disappointing announcement, investor confidence has taken a hit and the company is now entering a "show me stage," the analyst said.
The bullish case for the stock can still be made, as there are some differentiating factors between the reported XLRS programs and XLRP programs, Pantginis said:
- XLRS included intravitreal injections and was dosed into a highly heterogeneous population.
- The XLRP programs are dosed in subretinal fashion.
Wedbush: Silver Lining In Biogen Announcement
Applied Genetic's Biogen termination announcement has a "silver lining," as the company now has full rights to the XLRP gene therapy program, which is seen as a primary value driver, Nierengarten said in a research report.
Biogen previously controlled worldwide rights to the XLRS program and Applied Genetics merely received a low-teens royalty payment, the analyst said.
Applied Genetic is now positioned to benefit from more upside in the XLRP program, which boasts multiple advantages over XLRS, Nierengarten said:
- A larger market.
- Better-defined biology through validated higher order animal models.
- Clinical POC established by other sponsors.
- Superior benefits of subretinal delivery.
On the flipside, Applied Genetics will likely need incremental financing to proceed, but there is nevertheless a "positive path forward" with its XLRP opportunity, according to Wedbush.
Related Link: Wells Fargo Bullish On Applied Genetic Technologies Ahead Of Program Update
BMO: Negative Signal From Biogen
Although the return of full rights related to XLRP from Biogen is a positive development for Applied Genetic, the fact that Biogen decided to return rights ahead of proof-of-concept data — which is expected in the third quarter of 2019 — is a "negative signal," Luchini said in the downgrade note.
This also implies incremental risk to the company's success in XLRP, for which BMO lowered its probability of success from 15 percent to 10 percent, the analyst said.
Price Action
Shares of Applied Genetics hit a new 52-week low of $3.32 Thursday and were down 47.56 percent at $3.44 at the time of publication.
Related Link: The Daily Biotech Pulse: Vivus Extends Supply Deal With Sandoz, Applied Genetic Snaps Ties With Biogen
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