Stifel upgraded IDEAYA Biosciences (NASDAQ:IDYA) to “buy” from “hold” but cut its price target to $20 from $27, saying the risk/reward around the company’s IDE397 drug candidate is favorable with the stock in the mid-to-low teens. It closed at $12.79 on March 9.
IDEAYA is a clinical-stage targeted oncology company leveraging synthetic lethality and direct targeting to find new therapeutic approaches in cancer. Its most advanced program in synthetic lethality is IDE397, which aims at exploiting metabolic differences between healthy tissue and MTAP-deleted tumors.
“Our thesis remains largely unchanged around IDE397 (MAT2A), though we think the stock now prices in a more favorable risk/reward,” writes analyst Benjamin Burnett, Ph.D. “We view the odds of IDE397 success at roughly about 1:3.”
Dr. Burnett said that when the stock was in the mid-$20’s, “we believed the downside outweighed the upside, and therefore didn’t like the setup. We don’t think the odds of success have changed, but based on our view that cash, darovasertib (MUM), and the pipeline creates a floor value of about $10/share, and that the mid-to-high $20’s is possible on a good outcome, we believe the risk/reward is now skewed to the upside and, therefore, resonates more with a positive thesis.”
Also, at these levels, “we don’t think it will take much to move the stock,” he added. “Our base case is that the MAT2A data look underwhelming as a monotherapy, but sufficiently active to shift the debate to combination approaches.”
