H.C. Wainwright has launched coverage of OncoMed Pharmaceuticals (NASDAQ:OMED) with a “buy” rating and $20 price target. The stock closed at $11.87 on Wednesday.
“We believe OncoMed is entering a year of dramatic changes with upcoming opt-in decisions for its lead drug candidates expected from its three partners: Celgene, Bayer and GlaxoSmithKline,” writes analyst Shaunak Deepak.
In addition to near-term opt-in milestones that could reach $172-million, “we believe these partnerships could payoff with long-term benefits and free-up OncoMed’s resources to pursue new development activities,” he added.
OncoMed’s lead anti-DLL4 monoclonal antibody, demcizumab, is actively being evaluated in combination regimens for pancreatic and non-small cell lung cancer (NSCLC).
“We believe a positive readout from the Phase 2 YOSEMITE trial in pancreatic cancer could lead partner Celgene to opt-in to the demcizumab program in early 2017, followed by a readout from the Phase 2 DENALI trial in NSCLC a year later,” Mr. Deepak said.
Unlike its other collaborations, “we believe OncoMed’s ability to co-develop/co-promote drugs with Celgene in the U.S., gives the company greater exposure to the potential success of demcizumab,” he added.
Although the Bayer partnership is structured as more of a conventional pharma partnership, with OncoMed receiving milestones and royalties as Bayer shoulders development costs, Mr. Deepak said this program could prove fruitful for OncoMed, given the potential for broad use of Wnt pathway inhibitors.
The lead drug candidate in this collaboration, vantictumab, has shown promising early signs of single-agent activity in breast cancer, he said, adding that data from a Phase 1b study may drive Bayer to opt-in to the program in 2017.
Despite the failure of the Notch3 inhibitor, tarextumab, in the ALPINE trial in pancreatic cancer, Mr. Deepak said data from a Phase 1b study of tarextumab suggest that the drug has activity in patients with small cell lung cancer (SCLC).
He said the ongoing PINNACLE study in SCLC might yield positive results, given fundamental differences in the cancers. “Following the readout in 2017, we think Glaxo may opt-in to develop tarextumab and advance the compound into Phase 3 trials.
