ARMO Biosciences Has 'Potential Blockbuster' Cancer Drug In Pipeline, BMO Says

Late-stage immuno-oncology company ARMO Biosciences Inc ARMO recently went public last month, offering 7.53 million shares at $17 each. The IPO was priced on Jan. 26.

The Analyst

After the expiration of the IPO quiet period, BMO Capital Markets analyst Matthew Luchini initiated coverage of ARMO Biosciences with an Outperform and $75 price target.

The Thesis

ARMO Bioscience's lead drug AM0010, currently evaluated for pancreatic ductal adenocarcinoma, or PDAC, is a potential blockbuster, Luchini said in a Tuesday note. The drug combines T-cell-activating and anti-inflammatory properties to improve outcomes when combined with checkpoint inhibitors or chemotherapy compared to the standard of care, the analyst said in a Tuesday note.

The analyst expects an interim update from the second-line PDAC Phase 3 trial in the late first quarter or early second quarter after the first 60 patients have completed four months of therapy. Although details could be limited, Luchini said the analysis is a derisking event, as it will consider safety and efficacy.

A second interim update planned for the first half of 2020 could support a biologics license application submission, Luchini said. The final data is likely to be available by the end of 2020, supporting Armo's late 2021 launch assumption, the analyst said.

BMO estimates PDAC treatment could represent a $260 million peak sales opportunity.

Non-small cell lung cancer, or NSCLC, could be AM0010's biggest opportunity, with Phase 2 trials currently underway in both first- and second-line NSCLC, Luchini said. BMO projects a $1-billion peak sales opportunity in the first-line setting alone.

"We look for enrollment updates throughout 2018 and potential initial response data by late 2018/early 2019," Luchini said. 

Label expansion and an early-stage pipeline provide opportunities for upside, he said. 

The Price Action

At the time of writing, the shares of ARMO Biosciences were rallying 4.38 percent to $56.

The stock has gained about 90 percent since its January listing. 

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