Versartis' Somavaratan Still Has A Path Forward; Cantor Reiterates Buy

Cantor Fitzgerald cut its Versartis Inc VSAR target from $34 to $14 — and was still able to rate it Overweight.

The stock dropped from $21.60 to $3.20 in Friday pre-market trading after the firm released negative Phase 3 data on its Somavaratan trial for pediatric growth hormone deficiency.

The treatment missed its primary endpoint and failed to prove non-inferior to its active comparator, Pfizer Inc. PFE’s Genotropin. In general, patients with twice-monthly Somavaratan grew 9.44 centimeters per year against daily Genotropin’s 10.70 centimeters.

However, Cantor Fitzgerald was encouraged by results in the per-protocol population, which did meet non-inferiority criteria with improved results of 9.71 centimeters against the competitor’s 10.73 centimeters.

“Although we believe these pivotal data are insufficient to support approval, we believe that optimizing for a higher dose administered more frequently could achieve the range of activity to demonstrate non-inferiority,” analyst Elemer Piros wrote in a note.

An additional trial would be needed, ultimately delaying commercialization and “potentially diminish[ing] the company’s advantage over competitor Ascendis Pharma A/S ASND.”

Cantor Fitzgerald’s price adjustment accounts for a two-year rollout delay from 2019 to 2021; lower expectations for peak pediatric-market penetration from 30 percent to 20 percent; and decreased probability of success from 70 percent to 55 percent (see Piros' track record here).

At the time of publication, Versartis was down 85 percent in futures trading, while Ascendis was up 44.2 percent.

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