H.C. Wainwright slashed its price target for Mersana Therapeutics (NASDAQ:MRSN) to $16 from $33 after the company disclosed a partial clinical hold on its lead clinical program targeting HER2 expressing cancers. The stock closed at $11.26, down $5.20, on July 19.
Analyst Debjit Chattopadhyay writes that the hold followed a Grade 5 event in a patient being treated at the cohort 7 dose. The program had progressed to cohort 8, and at least one patient has been treated at a higher dose.
The partial clinical hold allows continued dosing of all patients already being treated, but prevents expansion until the cause of death can be established and a suitable path forward is established, he added.
Mr. Chattopadhyay said the the setback delays progress in a very competitive segment, leading to the following three scenarios: the Grade 5 event was drug related; there was something unique about the patient and the program continues with strict inclusion criteria; and the event is not drug related and the program continues unchanged.
“In the first scenario, XMT-1522 is likely to be an impaired asset, as the [low dose] is unlikely to be clinically competitive, in our view, and we hope management discontinues the program,” he added.
“Until we have definitive clarification, we are removing XMT-1522 from our valuation analysis,” he said. “In the event the Grade 5 is deemed non-drug related, or the study continues dose escalation without any onerous inclusion criteria, XMT-1522 could provide significant upside to our target.”
