Acceleron Pharma Rallies After Phase 3 MDS Data, But Goldman Sachs Still Isn't Buying

Acceleron Pharma Inc XLRN, a clinical-stage biopharmaceutical focused on the treatment of serious and rare diseases, saw its stock soar after reporting encouraging Phase 3 data. But investors who are aggressive on the stock may want to reconsider, according to Goldman Sachs.

The Analyst

Goldman Sachs' Terence Flynn upgraded Acceleron from Sell to Neutral with a price target lifted from $21 to $40.

The Thesis

Acceleron, along with its partner Celgene Corporation CELG, said Thursday its lead pipeline drug Luspatercept for myelodysplastic syndrome achieved the primary endpoint of red blood cell transfusion independence.

Flynn named the following reasons for investors to be incrementally optimistic on Acceleron: 

• The likelihood of ultimate success for Luspatercept has increased from 75 percent to 90 percent, in Goldman Sachs' view.
• The sell-side firm's peak Luspatercept estimate was lifted from $1.3 billion to $1.6 billion.
• Goldman's peak revenue estimate for Acceleron rose from $300 to $360 million based on a 23-percent sales royalty. 
• Expectations for a faster ramp in MDS.

Flynn's peak Luspatercept revenue model is unchanged from prior estimates and still falls below Celgene's guidance of more than $2 billion, the analyst said. Acceleron could expand the opportunity to RS-negative patients and front-line, but it would require a head-to-head superiority trial versus other therapies, Flynn said. It's difficult to predict at this point if Luspatercept boasts a superior profile, he said. 

Acceleron still faces a long-term risk from gene therapy-focused companies, especially if newly diagnosed patients are successfully treated with therapies from companies like bluebird bio Inc BLUE, which would lower the prevalence pool over time, according to Goldman Sachs. 

Price Action

Acceleron Pharma shares were rallying 40.94 percent Friday morning to $47.89. 

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