On Tuesday, BTIG raised the price target on shares of Mereo BioPharma Group (NASDAQ:MREO) to $6.00, up from the previous target of $4.00, while reiterating a Buy rating on the stock. The adjustment follows the completion of enrollment for the Phase 3 Orbit and Cosmic trials of setrusumab, a treatment for osteogenesis imperfecta (OI), also known as brittle bone disease.
The firm noted the timely completion of enrollment as indicative of the increasing anticipation for setrusumab's potential to significantly impact OI treatment. The Orbit trial, which has enrolled 158 patients between the ages of 5 and 25, will undergo up to two interim analyses, with the first expected by the end of 2024 or early 2025.
If the first analysis does not meet the efficacy threshold, a second interim analysis will follow before the final 18-month analysis.
Setrusumab has previously shown promise in a Phase 2 trial, reducing the annualized fracture rate by 67% after six months of treatment across 24 OI patients, a significant improvement over the current standard of care bisphosphonates, which only reduce fractures by about 20%. The management of Mereo BioPharma plans to release additional Phase 2 data in the second half of 2024, which could further elucidate the benefits of setrusumab.
The Cosmic study, the second Phase 3 trial of setrusumab, has enrolled 66 pediatric patients aged 2 to less than 7 years. Participants are randomized to receive either setrusumab or intravenous bisphosphonates, with the primary endpoint being the reduction in the annualized clinical fracture rate, including morphometric fractures.
The increased stock price target to $6 from $4 by BTIG reflects a raised probability of success for setrusumab in OI to 90% from the previous 75%, as well as an updated net present value sum of the parts (NPV SOTP) analysis by the firm.
InvestingPro Insights
In light of BTIG's updated price target for Mereo BioPharma Group (NASDAQ:MREO), real-time data from InvestingPro provides additional context for investors. The company currently holds a market capitalization of $386.47 million, indicating a notable presence in the biopharmaceutical sector.
Despite the lack of profitability in the last twelve months, with an operating income of approximately -$27.14 million, Mereo BioPharma's gross profit margin stands at a robust 74.26%, showcasing the company's ability to maintain a high margin on its products.
InvestingPro Tips highlight that Mereo BioPharma has more cash than debt on its balance sheet, suggesting a strong financial position that could support ongoing research and development activities. Analysts also anticipate sales growth in the current year, which may be fueled by the potential success of setrusumab.
Still, they do not expect the company to be profitable this year, aligning with the company's current negative P/E ratio of -14.73. On the performance front, the stock has experienced a substantial price uptick over the last six months, boasting a 37.66% return, which complements the optimistic outlook presented by BTIG.
For those seeking to delve deeper into Mereo BioPharma's financial health and stock performance, InvestingPro offers additional insights, with a total of 10 InvestingPro Tips available for MREO. To explore these tips and enhance your investing strategy, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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