Monday, Truist Securities adjusted its outlook on Scholar Rock (NASDAQ:SRRK) shares, raising the biotechnology company's price target from $36.00 to $45.00 while maintaining a Buy rating.
The adjustment follows a recent failure of a Phase 3 trial by a competing company in the Spinal Muscular Atrophy (SMA) market. The analyst highlighted Scholar Rock's significant improvements in SMA treatment with its drug Apitegromab as a key factor for the increased price target.
The increased price target is based on the expectation of higher peak sales for Scholar Rock's SMA treatment, which are now estimated to reach $1.5 billion, up from the previous $1.2 billion forecast. The analyst's optimism is rooted in the belief that the SMA market opportunity may be larger than previously expected, particularly after the competitive threat was lessened due to the competitor's trial miss.
The analyst also noted the potential additional value to Scholar Rock's share price from increased peak sales, mentioning that every additional $100 million in peak sales could add approximately $3.00 per share to their discounted cash flow (DCF) valuation. This revision reflects the firm's confidence in the company's growth prospects within the SMA treatment landscape.
Moreover, Scholar Rock's Apitegromab is not only being observed for SMA but also is in a Phase 2 trial for obesity, with data expected in the second quarter of 2024. The Truist Securities analyst pointed out that the current model does not yet account for the obesity trial, suggesting further upside potential.
The analyst concluded by suggesting that the positive data on SMA and the ongoing trials could make Scholar Rock an attractive candidate for acquisition. This perspective offers insight into the biotech firm's strategic positioning and future possibilities in the pharmaceutical industry.
In other recent news, Scholar Rock, a biopharmaceutical company, has had its stock price target upgraded by BMO Capital Markets and H.C. Wainwright due to strong financial performance and promising drug trial results. BMO Capital Markets adjusted its target to $39.00 from $38.00, while H.C. Wainwright increased its target to $40 from $35. Both firms maintained their positive ratings on the stock.
These adjustments followed Scholar Rock's recent developments, including successful third-quarter earnings and the positive results from its Phase 3 SAPPHIRE study for the drug apitegromab, a potential treatment for spinal muscular atrophy (SMA). The study met its primary endpoints, leading to a significant improvement in motor function.
Further bolstering the company's financial standing, Scholar Rock completed a $345 million follow-on offering, raising its cash balance to approximately $463 million. The company is preparing to submit regulatory applications in Q1 2025, with a U.S. commercial launch of apitegromab planned for Q4 2025. Additionally, Scholar Rock is developing SRK-439 and conducting the EMBRAZE Phase 2 study, both aimed at obesity management.
Analysts from both BMO Capital Markets and H.C. Wainwright suggest that apitegromab has the potential to generate over $1 billion in revenue. These recent developments reflect Scholar Rock's focus on addressing unmet needs in SMA treatment and obesity management.
InvestingPro Insights
Scholar Rock's recent market performance aligns with Truist Securities' optimistic outlook. According to InvestingPro data, the company has seen a remarkable 222.76% price return over the last three months, reflecting growing investor confidence. This surge is likely influenced by the positive developments in its SMA treatment and the reduced competitive pressure mentioned in the article.
InvestingPro Tips highlight that Scholar Rock "operates with a moderate level of debt" and has "liquid assets exceeding short-term obligations," which could provide financial flexibility as it advances its clinical programs. However, it's important to note that the company "is not profitable over the last twelve months" and "analysts do not anticipate the company will be profitable this year," underscoring the speculative nature of biotech investments.
The stock's high price volatility, another InvestingPro Tip, aligns with the potential for significant price movements based on clinical trial outcomes, as evidenced by the recent share price surge following a competitor's trial failure.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips that could provide deeper insights into Scholar Rock's financial health and market position.
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