Baird: Mersana Is A Buy On Differentiated Platform For Cancer Indications

Mersana Therapeutics Inc MRSN is closing out its first year as a public company, and in that time it’s cleared an investigational new drug application and earned endorsements from four Street analysts.

Baird Equity Research expects the biotech will get even better with time.

The Rating

Analyst Michael Ulz initiated coverage on Mersana with an Outperform rating and $30 price target.

The Thesis

Baird is bullish on the potential efficacy and tolerability of Mersana’s dolaflexin platform — a view validated by recent Takeda and Merck KGaA partnerships. (See Ulz's track record here.) 

“Currently approved, traditional antibody drug conjugates are limited by a narrow therapeutic index, and we believe Mersana's proprietary dolaflexin platform has the potential to overcome this challenge,” Ulz said in the initiation note. 

The HER2-targeting XMT-1522 has demonstrated potency superior to that of approved ADCs, and it could see derisking in the June release of preliminary Phase 1 safety data and mid-2019 release of early proof-of-concept efficacy data, the analyst said. 

“We believe XMT-1522 has the potential to address an unmet need and meaningfully expand the market opportunity for ADCs beyond HER2+ breast cancer,” Ulz said. 

Baird anticipates potential in lung and gastric cancers and models peak U.S. sales of $1.4 billion.

The NaPi2b-targeting XMT-1536 is expected to face limited competition for lung and ovarian cancer indications and generate $800 million in U.S. peak sales, Ulz said. Its Phase 1 study is on pace to yield safety data by the end of the year, with efficacy data in 2019, he said. 

“We believe wholly owned XMT-1536 is largely underappreciated and expect success could drive meaningful upside." 

Price Action

Mersana shares were rallying 4.5 percent to $17.75 at the time of publication Tuesday. 

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