Rodman starts Affymax at market outperform
Rodman & Renshaw has initiated coverage of Affymax (NASDAQ:AFFY) with a “market outperform” rating and $20 price target, pointing out that the company could soon chip away at Amgen’s 20-year monopoly in the dialysis space. The stock closed at $12.44 on Thursday.
Analyst Michael King writes that Affymax is on the brink of FDA approval and launch of its stimulating agent, peginesatide, for use in the treatment of severe anemia in patients with end-stage renal disease currently on dialysis. “In our view, approval is likely by the product’s PDUFA date of March 27, 2012,” he said.
“We believe that the market uptake of peginesatide will be aided by both its once-monthly dosing regimen (and the inherent pharmcoeconomic benefits compared to Epogen, which is administered on average 13 times per month) and the increasingly cost-conscious nature of dialysis organizations since the introduction of new reimbursement regulations for patients on public insurance,” he added.
Mr. King figures the shares “appear poised for a greater than 50% move, with little downside risk. Despite the increase in share price in recent days, in our view, the value of Affymax, at roughly $450 million, is held back by two factors: Amgen’s legacy in the dialysis space and the safety signal that was seen in the PEARL study, which explored use of peginesatide in the pre-dialysis setting.”
He sees “little risk to approval” based on the positive 15-1 vote by FDA’s Oncologic Drugs Advisory Committee last December.
Noting that the shares are currently priced significantly below those in its peer group, he points out that Affymax is followed by only six sell-side analysts, compared with more than 40 who cover Amgen. “In our view, this informational imbalance presents investors with an opportunity for significant appreciation,” he added.