On Wednesday, Citi maintained a buy rating on Merus NV (NASDAQ: ) and raised its price target to $93 from $70. The change follows a recent American Society of Clinical Oncology (ASCO) win for the company’s investigational therapy peto in combination with pembrolizumab.
Citi’s analysis suggests the market may be underestimating the sales potential of PETO, a first-line treatment for head and neck squamous cell carcinoma (HNSCC). The company has launched a new way to estimate oncology treatment duration, which could impact revenue forecasts across a variety of solid tumors.
The traditional approach of using median progression-free survival (mPFS) as an indicator of treatment duration has been challenged. Due to the presence of “super responders,” this method may not accurately reflect the average time a patient receives treatment. Treatment duration for these patients is significantly longer, which may lead to an underestimation of the drug’s peak revenue potential.
Citi’s revised methodology suggests that when the potential for peto to treat HNSCC is applied, peak sales could reach approximately $4 billion, a significant increase from the previous estimate of $2.5 billion. This substantial reassessment was a key driver in the decision to raise Merus’ price target to $93.
Merus shares responded to Citi’s positive outlook as investors consider the impact of the new sales forecast on the company’s growth and valuation. The raised price target reflects the company’s confidence in Merus’ ability to fully leverage its oncology pipeline and underlying market demand for its therapies.
In other recent news, Merus NV has been the subject of numerous analyst revisions after encouraging data from a study of its drug petosemtamab in combination with Merck & Co.’s Keytruda in head and neck cancer.
Financial services firm Stifel raised its target price on Merus stock to $99.00 from the previous price of $90.00 and maintained a buy rating on the stock. Analysts at the company said the drug’s sales potential could be close to $3 billion, and the total addressable market could reach $4-5 billion.
Merus also caught the attention of BofA Securities and Truist Securities, which lowered their price targets on Merus stock to $76 and $88, both maintaining buy ratings. BMO Capital Markets and TD Cowen also expressed confidence in Merus’ clinical program, raising price targets and maintaining positive ratings.
Additionally, Merus presented data on its investigational drug MCLA-129, a potential treatment for non-small cell lung cancer, showing significant response rates. The company also expressed interest in entering into a partnership to support the continued development of this therapeutic candidate. These latest developments highlight Merus’ progress in oncology.
Investment Professional Insights
As Citi maintains a bullish stance on Merus NV (NASDAQ: MRUS ), the InvestingPro platform provides more context on the company’s financials and market performance. Merus stock has a market capitalization of $3.76 billion and has a one-year total return of 125.32%, reflecting investor optimism.
Still, the company’s financials remain challenging, with gross margin negative at -276.6% for the trailing 12 months to Q1 2024, indicating that Merus faces significant costs relative to its revenue.
InvestingPro Tips highlights that Merus holds more cash than debt on its balance sheet, and analysts have upgraded earnings for the period ahead, showing confidence in the company’s financial management and future performance. Despite concerns about profitability and analysts not expecting the company to turn a profit this year, Merus’s liquid assets exceed its short-term debt, providing some financial stability.
For readers looking for a more comprehensive analysis, additional InvestingPro tips are available on the platform. Use coupon code PRONEWS24 Get an additional 10% off a full-year or annual subscription to Pro and Pro+, and learn why analysts are forecasting sales growth and how the company’s strong returns over the past three months will impact investment decisions.
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