A differentiated approach to gene editing has ushered a bullish sentiment from BofA Securities and Morgan Stanley on Graphite Bio, Inc. GRPH just a few weeks after its IPO.
BofA Securities on Graphite Bio
Analyst Geoff Meacham initiated the firm’s coverage on Graphite with a Buy rating and $35 price target.
The company has identified a process using a combination of using clinically validated technologies to address a broad set of severe genetic diseases, said the analyst in a Tuesday note. The combination is especially encouraging as preclinical data for Graphite’s GPH101 trial has shown correction rates exceeding 40%, “well above the estimated 20%,” said Meacham.
The company’s additional trials (GPH201 & GPH301) highlight the scope of the technology’s potential across varying disease types, said the BofA Securities analyst.
If GPH101 proves to be a curative following initial clinical data in late 2022, Graphite could generate upwards of $2 billion in peak sales, said Meacham.
Meacham arrived at a $35 price target by factoring in a 15-30% likelihood of success across Graphite’s pipeline and an 11-12% WACC on projected financials through 2035. Further upside will be unlocked as positive data from clinical and preclinical trials increase the likelihood of success, said the analyst.
Morgan Stanley on Graphite Bio
Analyst Jeffrey Hung initiated the firm’s coverage on Graphite with an Overweight rating and $35 price target.
In addition to highlighting the preclinical effectiveness of GPH101, Hung mentioned that Graphite reported 30-40% genetic correction in GPH201 (1-5% needed for immunity) and a 15% in GPH301 (5-10% needed for a cure) in its preclinical data.
The company has significant expertise in gene editing and sickle cell disease (GPH101’s target) through Dr. Matthew Porteus, the pioneer of cell-based CRISPR technologies, and CEO Dr. Josh Lehrer, who has led a clinical development strategy for a previous sickle cell disease treatment, said Hung.
Hung factored in higher likelihoods of success than his BofA Securities counterpart and used a 15% discount rate to arrive at a $35 DCF valuation.
About Graphite Bio
According to its website, "Graphite has curated a unique approach to gene editing utilizing validated technologies to not only cut and remove malignant or diseased genes but also to replace them with normal genes."
As noted in both the BofA Securities and Morgan Stanley analyst notes, the ability to address the underlying defect is unique to Graphite.
The company has proposed combining CRISPR and homologous directed repair (HDR) technologies to carry out its plan.
Graphite leverages CRISPR to cut the mutated genetic sequence, delivers a normal gene sequence using the best-validated technology for the disease type (adeno-associated virus (AAV6) in the case of sickle cell), and HDR to copy the corrected gene.
Graphite has designed three ongoing trials for the treatment of several severe genetic diseases:
- GPH101: GPH101 is beginning its phase 1/2 study to determine the safety of treatment in patients with sickle cell disease.
- GPH201: GPH201 is a preclinical study for the treatment of X-linked severe combined immunodeficiency (XSCID).
- GPH301: GPH301 is a preclinical study for the treatment of Type 1 and Type 3 Gaucher Disease.
GRPH Price Action: Graphite Bio was down 7.37% to $25.51 at last check Tuesday.
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