Medarex, Inc. (MEDX) – Buy (was Hold)
MEDX: Upgrading to BUY with $11 PT, Based on Expectations for Phase 3 CNTO-148 Data, Ongoing Ipilimumab Trials, and Other Upcoming Pipeline News – 1Q08/Early 2Q08 Review
[Comments from Needham following their upgrade the other day. Copied from Jon's post on Ihub. Evidently we should be able to see some IP-10 data within a couple of days].
Yesterday, Medarex reported 1Q08 earnings, and in a discussion with the Company, we reviewed the current pipeline and outlook for 2008. The Phase 3 1st-line melanoma DTIC +/- ipilimumab combo trial is underway, and Medarex is in discussion with the FDA to change the primary endpoint from progression free survival (PFS) to overall survival (OS) with data expected later in 2008.
The 2nd line melanoma data presented to the FDA will be at the upcoming 2008 ASCO Meeting: while it is known that the trial failed its primary outcome, we expect to see evidence of ipilimumab activity that may be helpful in understating the drug effect in other trials underway. The phase 3 CNTO-148 data from JNJ are expected at the EULAR Meeting (June 11-14). Also, Medarex recently initiated 2 Phase 2 trials for MDX-1100, an IP-10 antibody, in ulcerative colitis and rheumatoid arthritis: Phase 1 data in the ulcerative colitis will be presented at the Digestive Disease Week (May 17 - 22).
We believe MEDX stock is positioned to grow from here, based on
progress with the internal programs as well as external partnered programs as outlined above. We expect significant newsflow throughout 2008 and into 2009 to generate increasing interest in MEDX stock. We note that Medarex is one-stop shopping in Ab therapeutics, with 6 propriety programs, 4 profit share programs, and over 10 cash and carry programs, in addition to ipilimumab.
Therefore, we are upgrading our rating to BUY (was HOLD) with a Price Target of $11. We are positively inclined towards the risk/reward at the current valuation. To arrive at our new target price, we include current cash, stock of Genmab and Avant, ipilimumab revenues, CNTO-148 royalty stream, and a comparables assessment of the deep pipeline.
Medarex reported a 1Q08 loss of $38.5 MM, and the Company ended 1Q08 with $464.5 MM in cash, cash equivalents, and marketable securities, not including equity interest in Genmab and Avant (~$210 MM). With an estimated cash burn of $175 MM for 2008, we believe the Company has funding for operations through 2010. |
