On Wednesday, Merus N.V. (NASDAQ:MRUS) shares received a boost as BofA Securities increased their price target to $80 from the previous $61, while reaffirming a Buy rating on the stock.
The adjustment follows Merus' announcement of a 67% objective response rate (ORR) in a study involving first-line (1L) head and neck squamous cell carcinoma (HNSCC) patients. The patients were treated with a combination of petosemtamab and pembrolizumab.
The company revealed plans to commence a phase 3 trial comparing petosemtamab plus pembrolizumab against pembrolizumab alone in CPS≥1 1L HNSCC patients, irrespective of HPV status, by the end of the year. According to Merus' management, the observed ORR might pave the way for accelerated approval of the treatment.
BofA Securities highlighted the trial results as "highly encouraging," noting the increased confidence in the potential of petosemtamab in the treatment of 1L HNSCC.
The firm also pointed out the significant market opportunity for the drug, citing its promising signs of efficacy and a favorable safety profile.
The revised price target is partly based on the projection of $1.56 billion in risk-adjusted peak sales for petosemtamab in the 1L HNSCC market.
BofA Securities reiterated their stance on Merus as their top small-cap pick for 2024, expressing optimism about the drug's commercial prospects.
InvestingPro Insights
Following the positive outlook from BofA Securities, Merus N.V. (NASDAQ:MRUS) exhibits a blend of financial metrics and market performance that investors may find noteworthy. With a market capitalization of $3.22 billion, the company has shown a formidable price performance, with a 164.82% return over the last year and a remarkable 99.53% year-to-date return. This momentum is reflected in the recent price upticks, with a 26.43% increase in the last week alone.
From an operational standpoint, Merus holds more cash than debt on its balance sheet, which is a reassuring sign for investors concerned about financial stability. Additionally, analysts have revised their earnings upwards for the upcoming period, indicating a bullish sentiment on the company's future performance. Despite these positive indicators, it's important to note that the company is not expected to be profitable this year, and it trades at a high revenue valuation multiple of 9.22, based on the last twelve months as of Q1 2024.
For investors seeking a deeper dive into Merus' financial health and future prospects, InvestingPro offers a comprehensive analysis with additional tips. Currently, there are 15 more InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/MRUS. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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