The stock market’s behavior might appear baffling at times, but when you see shares of a biotech sinking, the reason is almost always one of two ready-made options: regulatory rejection or disappointing clinical trial results.
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For disappointed investors of Dicerna Pharmaceuticals (DRNA), the latter case sent the stock tumbling by 28% in a single session last week.
Specifically, the downturn came about after the company released data from the phase 2 trial evaluating nedosiran as a treatment for primary hypoxia (PH) types 1 and 2, a rare condition where painful kidney stones are formed from the production of too much oxalate.
Although the data showed nedosiran reduced urinary oxalate (Uox) levels in a statistically significant way for PH1 patients, it failed to do so in the PH2 group. Secondly, the reduction in oxalate levels did not compare well to the levels achieved in earlier phase 2 studies.
Nedosiran is also being evaluated as a possible therapy for PH3 patients, with a data readout anticipated in October. Leerink Partners’ Mani Foroohar thinks the latest results don’t bode well for that study either.
“The company confirmed these results would not support approval in PH2,” noted Foroohar, “And we believe that chances of nedosiran showing activity in PH3 are thrown into question by this disclosure as well – removal of opportunities in PH2 and PH3 slashes our probability-unadjusted estimates for nedosiran by ~50%.”
Moreover, you can also take the blue-sky scenario for nedosiran to show best-in-class credentials in PH1 off the table, as the amount of patients reaching Uox normalization with nedosiran appears similar to those achieved by rival Alnylam’s PH1 treatment Oxlumo, which gained FDA approval last November.
“We maintain our estimates for nedosiran in PH1, noting that commercialization against Oxlumo will remain challenging without clear differentiation on the label,” Foroohar summed up. Furthermore, the analyst has entirely removed PH2 and PH3 sales from his estimates.
Accordingly, there’s a price target reduction in order. The figure drops from $54 to $47, but nevertheless still suggests upside of ~53% from current levels. Foroohar’s rating stays an Outperform (i.e., Buy). (To watch Foroohar’s track record, click here)
Overall, Dicerna retains most of the Street’s support. Based on 7 Buys vs. 2 Holds, the stock boasts a Strong Buy consensus rating. The analysts expect the shares to claim back recent losses; the $31.44 average price target implies one-year gains of ~42%. (See DRNA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
