Morgan Stanley Downgrades Acceleron As Valuation Reaches Price Target

Acceleron Pharma Inc XLRN shares have gained about 39 percent since June 28 in reaction to positive Phase 3 study results for its luspatercept in low-to intermediate-risk myelodysplastic syndromes.

The candidate also posted  positive results in a late-stage trial that evaluated it for transfusion-dependent beta thalassemia.

The Analyst

The rally sent Morgan Stanley analyst Matthew Harrison to the sidelines. He downgraded Acceleron from Overweight to Equal-weight and maintained a $50 price target. 

The Thesis

Acceleron's luspatercept data is strong, positioning the company for a filing in the first half of 2019, but there is possibility of limited near-term upside, Harrison said in a Friday morning note. (See the analyst's track record here.) 

Harrison's view that the novel TGF-beta platform is a better way to treat anemia has largely materialized following the positive data reported for the two indications, he said. The analyst projects limited upside until more details are presented on the magnitude of the efficacy response and safety, which is likely to come at the December American Society of Hematology meeting. 

"Other catalysts include initial data on ACE-083,including the final dose-escalation results in [the second half of 2018] as well as initial ACE2494 data in [the first half of 2019." 

With both Phase 3 readouts now reflected in Acceleron's valuation, Harrison said the stock has a more balanced risk-reward profile. 

Key upside drivers include luspatercept data, which could notably increase sales estimates, or data from the early stage pipeline, which is not reflected in Acceleron's valuation, the analyst said. 

The Price Action

Acceleron shares have added about 11 percent year-to-date.

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