Merus stock target raised, holds Buy rating on oncology drug potential By Investing.com

On Wednesday, Citi maintained a Buy rating on Merus N.V. (NASDAQ:) and raised its stock price target to $93 from $70. The adjustment follows a recent win at the American Society of Clinical Oncology (ASCO) for the company’s investigational therapy, peto, in combination with pembrolizumab.

Citi’s analysis suggests that the market may be underestimating the sales potential of peto for first-line treatment of head and neck squamous cell carcinoma (HNSCC). The firm introduced a novel method for estimating treatment duration in oncology, which could impact revenue projections across various solid tumors.

The traditional approach of using median progression-free survival (mPFS) as a proxy for time-on-therapy has been challenged. This method may not accurately reflect the average time patients remain on treatment due to the presence of “super-responders.” These patients experience significantly longer treatment durations, which could lead to underestimating a drug’s peak revenue potential.

Citi’s revised methodology suggests that when applied to peto’s potential in treating HNSCC, the peak sales could reach approximately $4 billion, a notable increase from the previously estimated $2.5 billion. This substantial reevaluation has been a key driver in the decision to increase Merus’s price target to $93.

Merus’s stock has responded to the positive outlook from Citi, as investors consider the implications of the new sales estimates for the company’s growth and valuation. The raised price target reflects the firm’s confidence in Merus’s ability to capitalize on its oncology pipeline and the potential market demand for its therapies.

In other recent news, Merus N.V. has been the subject of numerous analyst revisions following encouraging data from a study of its drug petosemtamab, used in conjunction with Merck’s Keytruda for the treatment of head and neck cancer.

Stifel, a financial services company, increased its price target for Merus shares to $99.00, up from the previous target of $90.00, maintaining a Buy rating on the stock. The firm’s analyst suggested the sales potential of the drug could be closer to $3 billion, with the total addressable market potentially reaching $4-5 billion.

Merus has also caught the attention of BofA Securities and Truist Securities, who revised their price targets for Merus shares to $76 and $88 respectively, both maintaining Buy ratings. BMO Capital Markets and TD Cowen also expressed confidence in Merus’s clinical programs, raising their price targets and maintaining positive ratings.

Furthermore, Merus presented data on its investigational drug MCLA-129, a potential treatment for non-small-cell lung cancer, demonstrating notable response rates. The company also expressed interest in partnerships to support the continued development of this therapeutic candidate. These are the recent developments that highlight Merus’s progress in the field of oncology.

InvestingPro Insights

As Citi maintains a bullish stance on Merus N.V. (NASDAQ:MRUS), the InvestingPro platform offers additional context to the company’s financial health and market performance. With a market capitalization of $3.76 billion, Merus’s stock has exhibited a remarkable one-year price total return of 125.32%, reflecting investor optimism.

Still, the company’s financials show a challenging picture, with a negative gross profit margin of -276.6% for the last twelve months as of Q1 2024, indicating that Merus is facing significant costs relative to its revenue.

InvestingPro Tips highlight that Merus holds more cash than debt on its balance sheet and analysts have revised their earnings upwards for the upcoming period, suggesting confidence in the company’s financial management and future performance. Despite concerns about profitability, with analysts not anticipating the company to be profitable this year, Merus’s liquid assets exceed its short-term obligations, providing some financial stability.

For readers seeking a more comprehensive analysis, there are additional InvestingPro Tips available on the platform. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover why analysts anticipate sales growth and how the company’s strong return over the last three months could influence investment decisions.

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