Analyst: NewLink Shares Have Doubled This Month And There's Still Room For More Upside

Investors and analysts don’t seem to be in lockstep when it comes to NewLink Genetics Corp NLNK’s potential.

On Monday, the biotech firm secured Buy reiterations from Stifel Nicolaus and Cantor Fitzgerald, and last week, it earned upgrades to Buy from Jefferies and Baird Equity. Shareholders appear dubious of continued upside, though.

Despite an exclusively positive Street consensus with a $25.75 average price target, NewLink’s stock traded down as much as 12 percent to start the week.

What Aren’t Shareholders Seeing?

The market initially shared Cantor Fitzgerald’s “enthusiasm” surrounding progress on indoximod.

NewLink reported improving complete responses in advanced melanoma patients in a Thursday update of its Phase I,II trial. Data showed a 12-month response rate of 20 percent against a six-month rate of 12 percent. Of note, the overall response rate and disease control rate remained stable over the period.

“Although the news of the data has already driven a dramatic 127 percent appreciation in the shares, we think there is room for more,” Cantor Fitzgerald analysts Mara Goldstein and Alina Levchuk wrote in a Monday morning note.

Their optimism rested in the drug’s potential commercial market.

“Although indoximod is behind the market leader epacadostat, we think the market is large enough to accommodate both drugs,” Goldstein and Levchuk wrote. “NLNK has completed formulation work to permit longer exclusivity for indoximod.”

NewLink will participate in the Cantor Global Healthcare conference at the end of the month and is expected to begin Phase III for indoximod later in the year.

Cantor Fitzgerald issued a $26 price target on the stock, which traded around $17.11 at time of publication.

Who Are Investors Listening To?

Stat News biotech reporter Adam Feuerstein was notably critical of the sell-side response and warned of “red flags” in NewLink’s study.

$NLNK stock reaction today completely disconnected from viability of its IDO inhibitor. Does anyone remember the red flags last April? https://t.co/2n8icbNwd2

— Adam Feuerstein (@adamfeuerstein) September 7, 2017

$NLNK never disclosed % patients PD-L1 positive. 53% of patients were treatment naive. 100% of patients treatment naive for checkpoints.

— Adam Feuerstein (@adamfeuerstein) September 7, 2017

Baird analyst Michael Ulz on $NLNK indoximod: “… increasing our likelihood of success to 75% from 40%.”

The death of the sell-side. pic.twitter.com/7kR7iyie6x

— Adam Feuerstein (@adamfeuerstein) September 8, 2017