Mereo BioPharma raises stock targets on setrusumab optimism



On Tuesday, BTIG raised its price target on shares of Mereo BioPharma Group (NASDAQ: MREO ) to $6.00 from the previous price target of $4.00, while reiterating a Buy rating on the stock. The change follows completion of enrollment in the Phase 3 Orbit and Cosmic trials of setrusumab, a drug that treats osteogenesis imperfecta (OI), also known as brittle bone disease.

The company noted that timely completion of enrollment demonstrates growing expectations for setrusumab's potential to significantly impact the treatment of osteogenesis imperfecta. The Orbit trial, which enrolled 158 patients aged 5 to 25, will conduct up to two interim analyses, the first expected in late 2024 or early 2025.

If the efficacy threshold is not reached in the first analysis, a second interim analysis will be performed before the final 18-month analysis.

Setrusumab previously showed promise in a phase 2 trial, reducing annualized fracture rates by 67% after 6 months of treatment in 24 patients with osteogenesis imperfecta, a significant improvement over the current standard of care with bisphosphonates , the latter can only reduce fractures by about 20%. Mereo BioPharma management plans to release additional Phase 2 data in the second half of 2024, which could further elucidate the benefits of setrusumab.

The Cosmic study is the second Phase 3 trial of setrusumab and has enrolled 66 pediatric patients aged 2 to 7 years old. Participants were randomly assigned to receive setrusumab or intravenous bisphosphonates, and the primary endpoint was a reduction in annualized clinical fracture rates, including morphometric fractures.

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BTIG raised its stock price target to $6 from $4, reflecting an increase in setrusumab's chance of success in OI to 90% from the previous 75%, as well as the company's updated sum of the parts net present value (NPV SOTP) analysis.

Investment Professional Insights

InvestingPro's live data provides investors with more context given BTIG's updated price target for Mereo BioPharma Group (NASDAQ: MREO ). The company currently has a market capitalization of $386.47 million and occupies an important position in the biopharmaceutical field.

Despite the lack of profitability over the past 12 months, Mereo BioPharma's operating income was approximately -$27.14 million, but its gross profit margin was still as high as 74.26%, showing the company's ability to maintain high profit margins on its products.

InvestingPro Tips highlights that Mereo BioPharma has more cash than debt on its balance sheet, indicating a strong financial position to support ongoing research and development activities. Analysts also expect sales growth this year, which could be driven by the potential success of setrusumab.

Still, they don't expect the company to make a profit this year, consistent with the company's current negative price-to-earnings ratio of -14.73. In terms of performance, the stock has experienced significant gains over the past six months, returning 37.66%, which goes well with the optimistic outlook presented by BTIG.

For those looking to dive deeper into Mereo BioPharma's financials and stock performance, InvestingPro provides additional insight with a total of 10 InvestingPro Tips for MREO.To explore these tips and enhance your investing strategy, consider using the coupon code PRONEWS24 Enjoy an additional 10% discount on yearly or annual Pro and Pro+ subscriptions.

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