What happens to stocks if AI loses momentum?
On Wednesday, BMO Capital Markets adjusted its outlook on Arvinas Inc. (NASDAQ:ARVN), significantly reducing the price target on the company’s shares to $20.00 from the previous $82.00, while maintaining an Outperform rating. The stock, which has declined over 80% in the past year according to InvestingPro data, is currently trading near its 52-week low of $7.91. The adjustment follows the release of clinical trial data for Arvinas’ VERITAC-2, which did not demonstrate a statistically significant progression-free survival (PFS) benefit of their drug candidate vepdeg over fulvestrant in wild-type patient populations.
Arvinas’ VERITAC-2 data suggested that the use of vepdeg in treating ER+/HER2- advanced breast cancer might be limited to patients with the ESR1 mutation. In response to these findings, BMO Capital has updated its model for Arvinas, excluding any market penetration for vepdeg in patients without the ESR1 mutation and lowering both the probability of success (PoS) and market penetration assumptions for patients with the mutation.
Despite the disappointing trial results and the subsequent reduction in the price target, BMO Capital believes the market’s reaction to the news may have been excessive. The firm’s analysis indicates that, even with the narrowed market opportunity for vepdeg, Arvinas’ cash position, which they model at $13 per share, provides some support for the company’s valuation. InvestingPro data confirms this view, showing the company holds more cash than debt and maintains a healthy current ratio of 4.64, indicating strong short-term liquidity.
In light of the limited opportunity for vepdeg, BMO Capital has recalibrated its target for Arvinas’ stock, taking into account the revised expectations for market penetration and success probability. The new target represents a significant cut from the previous valuation, reflecting the narrowed scope of vepdeg’s potential market within the advanced breast cancer therapy landscape. According to InvestingPro analysis, the stock appears undervalued at current levels, with analyst targets ranging from $26 to $110. Subscribers can access 16 additional ProTips and a comprehensive Pro Research Report covering Arvinas’s full financial health analysis and growth prospects.
In other recent news, Arvinas Inc. reported outcomes from its Phase 3 VERITAC-2 clinical trial, conducted in collaboration with Pfizer (NYSE:PFE). The trial demonstrated a statistically significant improvement in progression-free survival (PFS) for patients with estrogen receptor 1 mutations (ESR1m) but did not achieve statistical significance in the broader intent-to-treat population. Despite the partial success, Citi adjusted its price target for Arvinas from $19 to $10, maintaining a Neutral rating, citing concerns over the trial’s impact on the broader patient group and potential regulatory scrutiny. Similarly, Oppenheimer downgraded Arvinas from Outperform to Perform, noting skepticism about the drug’s market differentiation potential. On a positive note, BTIG maintained a Buy rating with a price target of $69, expressing optimism about Arvinas’s cash reserves and future clinical data from other programs. The trial results have sparked varied reactions from analysts, reflecting the complexity of the clinical outcomes and their implications for Arvinas’s market position. Investors are keenly observing the detailed results expected at an upcoming medical conference, which could provide further insights into the drug’s efficacy and safety. Arvinas and Pfizer continue to focus on addressing treatment challenges for ER+/HER2- metastatic breast cancer, aiming to advance their investigational drug, vepdegestrant, in the market.
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