Leerink launched coverage of Clementia Pharmaceuticals (NASDAQ:CMTA) with an “outperform” rating and $23 price target. The stock closed at $16.11 on August 25.
Clementia’s lead asset, palovarotene, is a small molecule retinoic acid receptor gamma (RARγ) agonist poised to enter two Phase 3 clinical trials in 2017, “positioning Clementia’s programs to become the standard of care for orphan bone indications with high unmet needs,” writes analyst Joseph Schwartz.
Most of the value in his model is ascribed to the lead indication of fibrodysplasia ossificans progressiva (FOP), an ultra-rare, chronic and debilitating disease of abnormal bone formation in muscle, tendons, and ligaments, or heterotopic ossification (HO).
“We expect Phase 3 FOP data in 2019 to provide a major inflection point for the stock, preceded by multiple progress and data updates along the way,” he added.
To date, palovarotene has been tested in a 40 adult-patient chronic dosing study and a nine pediatric-patient flare-up acute treatment study. Mr. Schwartz said preliminary results suggest that chronically-treated patients have much lower bone volume of new HO than when patients are treated episodically.
Citing palovarotene’s anti-inflammatory and anti-fibrotic effects, Mr. Schwartz said Clementia also is exploring ocular indications, including dry eye disease, with planned Phase 1 study expected to start in the first quarter of 2018.
