Shares of Clovis (CLVS) are on the rise after Evercore ISI analyst Steven Breazzano upgraded the stock to Outperform, a buy-equivalent rating, citing an attractive valuation and his belief that potential of the PARP class of cancer drugs is “too big to ignore.” Clovis also saw another upgrade this morning, with RBC Capital analyst Kennen MacKay raising his rating on the shares to Outperform following the positive trend vote from the European CHMP on the company’s Rubraca treatment.
BUY CLOVIS, TESARO: In a research note to investors this morning, Evercore ISI’s Breazzano upgraded Clovis and peer Tesaro (TSRO) to Outperform from In Line, telling investors the recent selloff in the stocks has made their valuations attractive on a long-term basis for what he views as two company’s at the front of a de-risked oncology class poised for significant growth. The market opportunity for indications where PARP inhibitors already work justifies the valuations alone, he contended, adding that he views adoption of the PARP class so far as “robust,” indicating high physician/patient interest. The analyst argued that potential concerns about adoption/duration of therapy and a slowing growth rated should be temporary, as newly incident patients will drive durations of therapy higher and will build the underlying patient numbers over the next 2-3 years. Breazzano continues to view the PARPs as more similar than different, with Tesaro currently the market leader in ovarian, and Clovis the most inexpensive pure play PARP inhibitor on the market with a similarly efficacious and active drug. Nonetheless, the analyst trimmed his price target on Clovis shares to $72 from $73, and lowered his price target on Tesaro to $88 from $121.
RUBRACA VOTE: Following a Scientific Advisory Group – Oncology meeting last week and an oral explanation this week, the European Union’s European Medicines Agency’s CHMP communicated yesterday a positive trend vote for the rucaparib marketing authorization application and their intention to hold a final vote on the treatment indication at their March meeting. Reacting to the announcement, RBC Capital’s MacKay upgraded Clovis to Outperform from Sector Perform, as he believes the positive trend vote on Rubraca is a “clearing event” given its competitive profile relative to other PARP inhibitors. MacKay added that Clovis offers a “compelling valuation” for a commercial oncology company. Nonetheless, the analyst trimmed his price target to $72 from $80 based on the updated model for 2018 Rubraca treatment sales in U.S. and E.U, decreased maintenance ramp, and increases SG&A expense assumptions. Meanwhile, Morgan Stanley analyst Andrew Berens voiced a similar opinion, saying he sees Clovis’ announcement that Rubraca has received a positive trend vote from the European CHMP as strongly suggesting a positive final CHMP vote in March. While the analyst told investors in a research note of his own that he remains cautious ahead of the company’s fourth quarter report later this month due to Rubraca’s inferior competitive position prior to approval in second-line maintenance, Berens reiterated an Overweight rating and $86 price target on Clovis shares.
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