Challenging Road Ahead for Cancer Drugs, Nuvalent Seeks to Break the Mold

Stifel initiated coverage on Nuvalent Inc NUVL, recognizing that adopting a bullish stance in anticipation of Phase 1 cancer drug data, mainly when derived from heavily pretreated patients, has proven unprofitable for approximately two years. 

The analyst keeps the price target of $65, with a Buy rating.

The analyst notes that historically, such updates have resulted in low Objective Response Rates (ORRs) and short-lived efficacy, rendering late-stage market sales relatively inconsequential. 

Moreover, these drugs have often failed to distinguish themselves from entrenched, highly effective first-line (1L) standards of care.

However, a noteworthy exception arises in ALK+ Non-Small Cell Lung Cancer (NSCLC), where the preference for the older-generation TKI, Genetech's Alecensa (alectinib), persists over the considerably more potent Pfizer Inc's PFE Lorbrena (lorlatinib), primarily due to alectinib's broader ALK mutation coverage and better Central Nervous System (CNS) protection, despite its unique toxicity profile.

The analysts expect the reported ORR to be low—possibly between high teens to high twenties percent— based on the scan of the literature correlating with the proportion of patients with ALK compound mutations for whom NVL-655 was designed to be active.

Looking forward, a potential head-to-head victory against alectinib could translate into annual revenues in the $2-3 billion range, marking a significant opportunity for Nuvalent.

Stifel sees a bullish scenario emerging from the Phase 1 NVL-655 data. There is potential for these data to reveal instances of notable responses and reductions in circulating tumor DNA (ctDNA) levels in patients who have previously undergone lorlatinib treatment and carry the G1202R mutation. 

This outcome could substantiate the belief that NVL-655, at the very least, has the potential to capture a significant share of the approximately $500 million second-line (2L) market, offering superior efficacy and safety compared to lorlatinib. Moreover, it could further strengthen the first-line (1L) development proposition in competition with alectinib.

Price Action: NUVL shares are up 7.18% at $45.10 on the last check Wednesday.