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Evercore ISI initiated coverage of Aclaris Therapeutics , a clinical stage biotech working on immunology and inflammation drugs, at an outperform, saying the market is underpricing its odds for success heading into the release of clinical trial data. “We think the stock could trade up 300%+ on positive data (with more upside after the short-term move), and down ~67% on negative data (which we think would be overdone),” said analyst Gavin Clark-Gartner in a research note Tuesday. According to Clark-Gartner, investors have been so focused on the company’s lead drug candidate, zunsemetinib, that they are ignoring other compounds in its drug pipeline, and not assigning any value to it. Also, he said, investors may be overly pessimistic about the lead drug’s likelihood for success. Admittedly, the upcoming trial results may not be successful, which makes the bet a risky one, he said. However, with the backstop of the pipeline embedded in the trade, Clark-Gartner said, “We like the setup.” Aclaris shares are down nearly 60% this year, putting its market cap at $480 million. On Tuesday, shares fell 1.3%. A big blow to Aclaris stock came in March when zunsemetinib failed to meet its goals in a phase 2a trial for a skin disease known as hidradenitis suppurativa, or acne inversa. The drug is now being studied for moderate to severe rheumatoid arthritis, with phase 2b results expected before the end of the year, and psoriatic arthritis, with a readout expected in the first half of 2024. If Aclaris is successful with zunsemetinib, it will be the only MK2 inhibitor on the market for rheumatoid arthritis, which Evercore ISI sees as an advantage. A similar drug from Bristol Myers Squibb wasn’t successful in a different form of arthritis. However, the analyst thinks the two drugs behave “very differently.” Evercore ISI expects investors are only pricing in a 20% chance of positive data from the clinical trial, whereas the firm expects the odds are closer to 50%. — CNBC’s Michael Bloom contributed to this report.
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