After A Freefall In Axovant Shares, Chardan Upgrades

Axovant Sciences Ltd AXON's announcement this week that its lead drug candidate intepirdine failed in a late-stage trial comes after the stock lost 90 percent of its value over the past three months following a negative announcement on an Alzheimer's trial. 

The Analyst

Chardan's Gbola Amusa upgraded Axovant's stock rating from Sell to Neutral with a price target lowered from $2.50 to $2.

The Thesis

Axovant's stock has fallen 90 percent since September, and at its current value of around $2.40 there's "less scope for underperformance," Amusa said in the upgrade note. (See the analyst's track record here.) 

The stock's heavy losses are directly attributed to its intepirdine failure announcement in the pivotal Phase 3 MINDSET study on Sept. 25, 2017 and this week's disclosure of the discontinuation of intepirdine in all dementia indicators, the analyst said. 

Axovant's heavy losses shouldn't come as a surprise, as the analyst said intepirdine's failure has been "likely" dating back to Chardan's June 2015 initiation of the stock with a Sell rating. But now that investors have gained full visibility into intepirdine's prospects, the market could better appreciate Axovant's second dementia asset, nelotanserin, will meet unmet medical needs and launch — even if the likelihood is "low."

"Despite our remaining concerns, we see less scope for underperformance in the year ahead and therefore upgrade AXON from Sell to Neutral," Amusa said. 

Price Action

Shares of Axovant were down 2.52 percent in midday trading Wednesday. 

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