Baird lowers Tesaro stock price target, while Oppenheimer tweaks revenue model

Analysts at Baird cut their price target for Tesaro Inc (NASDAQ:TSRO) by almost a third to US$40 from US$60 after the biotech reported ovarian cancer drug Zejula sales in line with expectations but lowered 2018 guidance.

The $40 price target still constitutes substantial upside as Tesaro stock was down 11.5% to US$31.23 Friday.

READ: Oppenheimer slashes Tesaro’s price target to US$83 on fierce competition for Zejula

The US FDA-approved targeted therapy drug Zejula is aimed at women with ovarian, fallopian tube or peritoneal cancers. It is the undisputed leader in the ovarian cancer market commanding more than 50% market share, but Tesaro no longer expects growth in the second half of the year to accelerate.

“2Q18 Zejula sales of US$54mln were in line with expectations (cons:$54mln) and quarterly guidance (US$50-US$55M). That said, 2018 Zejula revenue guidance was decreased (US$225-US$235mln from US$255-275mln) due to a slowing of growth for the PARP class in recurrent ovarian cancer maintenance,” wrote Baird analysts Michael E Ulz and Colleen M Hanley.

“Overall, while we are encouraged by progress across the pipeline, we maintain our Neutral rating and reduce our price target to $40,” they added.

Broad pipeline progress

The Baird analysts said Massachusetts-based Tesaro’s pipeline strategy was focused on expanding opportunities in ovarian cancer and “additional tumor types”, particularly “lung cancer, with monotherapy, doublet, and triplet combos.”

“The Phase 3 NOVA data has positive read-through to other ongoing studies, supporting development in additional lines of ovarian cancer, breast, and lung cancer,” wrote the Baird analysts.

Oppenheimer’s investment thesis

Analysts at Oppenheimer said Tesaro’s second-quarter Zejula sales were slightly below their US$55.7mln estimates but in line with consensus.

“Tesaro lost US$3.04 per share compared to our estimated loss per share of US$2.69 and consensus loss per share of US$2.63,” wrote Oppenheimer analyst Leah Rush Cann in a note released Thursday.

“We are adjusting our 2018-2022 revenue outlook for Tesaro to account for lower estimated Varubi sales and slightly slower adoption of Zejula,” added Cann.

Based on expectation that Tesaro will grow unit sales of Varubi and Zejula in “additional indications and geographies” in the next few years, Cann estimated that total revenue would grow at a compound annual growth rate of 38.8% for the next five years, increasing to US$1.15bn in 2022.

She has an Outperform rating and an existing US$83 price target on Tesaro stock.

Story by ProactiveInvestors