CG Oncology gains Buy rating, $65 target from Roth/MKM

On Tuesday, CG Oncology (NASDAQ:CGON) received a Buy rating from Roth/MKM, accompanied by a price target of $65.00. The initiation of coverage by the firm is based on the potential of the company's drug candidate cretostimogene, which is expected to be submitted for a Biologics License Application (BLA) in the second half of 2025.

Cretostimogene is being developed for the treatment of BCG-unresponsive, high-risk non-muscle invasive bladder cancer (HR-NMIBC). Roth/MKM highlighted the drug's tolerability as a key advantage, which could enable it to capture market share from competing treatments that have faced tolerability issues.

The analyst firm is optimistic about the drug's efficacy, which is also seen as promising for the treatment of intermediate-risk NMIBC (IR-NMIBC). This optimism is reflected in the analyst's projection of over $2 billion in global sales for cretostimogene by the year 2033, targeting both HR- and IR-NMIBC markets.

The endorsement from Roth/MKM comes at a crucial time for CG Oncology, as the company prepares for the upcoming submission of the BLA. The favorable rating and high price target suggest a strong belief in the commercial potential of cretostimogene.

In other recent news, CG Oncology has reported promising results from its Phase 2 CORE-001 trial for bladder cancer treatment. The trial, which tested cretostimogene in combination with pembrolizumab, achieved a 54% complete response rate at the 24-month landmark.

The company's Chief Medical Officer, Dr. Vijay Kasturi, underscored the potential of cretostimogene as a non-surgical, bladder-sparing therapy. Adverse events related to the treatment were as expected, with no increased toxicity when the two drugs were combined.

In a recent development, Goldman Sachs upgraded CG Oncology following the encouraging clinical trial data. The upgrade was triggered by the increased success probability in treating high-risk non-muscle invasive bladder cancer, which rose from 75% to 85%. Goldman Sachs maintains a positive outlook on CG Oncology, interpreting the data as competitive against both approved and clinical-stage products.

The firm anticipates that the robust 12-month and duration of response findings will meet approval standards, reducing the risk of a negative outcome for the complete BOND-003 study, set to conclude later this year. The estimated commercial opportunity for cretostimogene in its targeted market is approximately $2.5 billion.

InvestingPro Insights

In light of Roth/MKM's optimistic outlook on CG Oncology (NASDAQ:CGON), it's worth noting some key financial metrics and analyst expectations from InvestingPro that could influence investor sentiment. Firstly, CGON holds more cash than debt on its balance sheet, which can be a reassuring sign of financial stability as they head towards their BLA submission for cretostimogene. Additionally, analysts anticipate sales growth in the current year, which could be a reflection of the market's confidence in the potential of their drug candidate.

On the valuation front, CGON is trading at a high revenue valuation multiple, with a market capitalization of $2.53 billion and a striking quarterly revenue growth of 172.68% as of Q1 2024. However, it's important to recognize that the company has not been profitable over the last twelve months, with a negative gross profit margin of over -10,000%. This underscores the high-risk, high-reward nature of investing in biotech firms like CG Oncology, where future profitability hinges on the successful development and commercialization of their drug candidates.

For investors looking to delve deeper into CGON's financial health and future prospects, there are additional InvestingPro Tips available that could provide further insights. With a strong return over the last month and three months, yet a decline over the last six months, the company's stock performance reflects the volatility and event-driven nature of the biotech industry. For a more comprehensive analysis, investors can explore the full suite of InvestingPro Tips at https://www.investing.com/pro/CGON.

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