Mizuho sets Tectonic stock Outperform with $51 target

On Monday, Mizuho (NYSE:MFG) Securities initiated coverage of Tectonic Therapeutics Inc. (NASDAQ:TECX) with an Outperform rating and a price target of $51.00 per share. According to InvestingPro data, this target represents significant upside potential from the current trading price of $17.02, with analyst targets ranging from $69 to $101 per share. The firm’s optimism stems from the potential of Tectonic’s leading drug candidate, TX45, which is being developed as a treatment for pulmonary hypertension related to left heart disease, also known as Group 2 PH.

Tectonic’s TX45 is a long-acting relaxin protein that stands out for its potential benefits in both efficacy and safety, as well as its convenient once-monthly subcutaneous dosing regimen. Mizuho analysts highlight the significant total addressable market (TAM) for Group 2 PH, which includes an estimated 2.5 million patients. They project that TX45 could establish a strong position within the severe patient subgroup known as CpcPH and potentially reach $3.3 billion in peak sales without adjustments.

The confidence in TX45 is notably contrasted with the general skepticism surrounding the relaxin class of treatments, particularly after Eli Lilly (NYSE:LLY)’s discontinuation of a similar program. However, Mizuho’s analysis suggests that the failure of Lilly’s program, which did not target Group 2 PH, should not negatively impact TX45. Further, they note the continued validation of the mechanism of action (MoA) for relaxin treatments, as evidenced by AstraZeneca (NASDAQ:AZN)’s ongoing Phase 2 trial of AZD3427 in Group 2 PH.

Mizuho’s valuation of Tectonic Therapeutics is also influenced by the company’s current market position, which is trading around its cash value. With a market capitalization of $317.64 million, InvestingPro analysis indicates the stock is currently overvalued relative to its Fair Value. The company maintains strong liquidity with a current ratio of 12.65 and holds more cash than debt on its balance sheet, though investors should note it’s quickly burning through cash reserves. This presents what Mizuho sees as a highly favorable risk/reward situation leading up to AstraZeneca’s decision on whether to advance AZD3427 to Phase 3 trials, expected in the second half of 2025. For deeper insights into TECX’s financial health and 8 additional ProTips, visit InvestingPro. This upcoming milestone is seen as a key catalyst for Tectonic’s stock.

In other recent news, Tectonic Therapeutic, Inc. announced it has secured approximately $185 million through a private equity funding arrangement. This capital is intended to support the clinical development of its promising treatments, TX45 and TX2100, as well as to enhance its proprietary discovery platform. The funding comes from a mix of new and existing investors, including Adage Capital Partners (WA:CPAP) LP and Farallon Capital Management, L.L.C. Meanwhile, Tectonic shared encouraging interim data from a Phase 1b trial for TX45, which showed significant improvements in patients with Group 2 Pulmonary Hypertension in Heart Failure with preserved Ejection Fraction (PH-HFpEF). The results have bolstered confidence in the ongoing APEX Phase 2 clinical trial, with top-line results anticipated in 2026.

However, Tectonic’s stock faced a setback following the termination of a similar drug trial by Eli Lilly, raising concerns about the potential success of TX45. Leerink, maintaining an ’outperform’ rating, noted the market’s apprehension regarding TX45’s efficacy following this development. Investors are eagerly awaiting further results from Tectonic’s trials to gauge the future potential of its lead product candidate. These developments highlight the challenges and opportunities faced by Tectonic in advancing its drug pipeline.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.