Tesaro ( TSRO ) shares kicked off 2018 by hitting an 18-month low after an analyst cut his estimates on the company's cancer drug, Zejula, noting the medication has been associated with more hospitalizations than AstraZeneca 's ( AZN ) Lynparza.
[ibd-display-video id=3059057 width=50 float=left autostart=true] By the closing bell on the stock market today , Tesaro dove 8.8% to finish at 75.62. Shares hit a low last seen in July 2016. Meanwhile, shares of AstraZeneca rose 2% 35.38. Shares of Clovis Oncology ( CLVS ), another rival, fell 2.9% to 66.05.
Piper Jaffray analyst Christopher Raymond cut his price target on Tesaro to 80 from 117, though he kept his neutral rating on the stock. He sees Tesaro's drug, Zejula, pulling in $48 million in fourth-quarter sales, down from earlier views for $53 million.
"Essentially, we believe initial assumptions around duration of therapy, dose and market share are too high," he said in a note to clients. "Given this, we would expect to see consensus numbers come down as we move into 2018."
Zejula is approved as a maintenance treatment for some patients with ovarian cancer who either partially or completely responded to chemotherapy. It belongs to a class of drugs called PARP inhibitors which includes Clovis' Rubraca and Lynparza.
Rubraca is approved to treat ovarian cancer patients with a specific mutation who have undergone at least two rounds of chemotherapy. Lynparza is approved to treat patients with the same mutation after at least three rounds of chemo and as a maintenance therapy.
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For 2018, 2019 and 2020, Raymond expects Tesaro's Zejula to generate $285 million, $433 million and $603 million in sales, respectively. The consensus is much higher with views of $49 million for the fourth quarter and $335 million for 2018.
Tesaro notes 40% of patients are on the 100-milligram dose of Zejula with 40% on 200-milligram and 20% on 300-milligram. Patients who move to a lower dose generally take a monthlong break for the drug, consistent with the label instructions.
"This math makes for an average quarterly net revenue per patient of closer to $16,700 vs. our modeled $21,000," Raymond said. "About 30% of patient starts so far have been treatment rather than maintenance, meaning many initial patients are now beginning to roll off therapy."
Further, according to Food and Drug Administration data, the incidence of hospitalization as a result of adverse events is 40% higher for patients treated with Zejula than Lynparza.
"We caution investors that the FDA's ( Adverse Event Reporting System ) data is likely incomplete and possibly inaccurate," he said. "That said, the signal is nonetheless striking - an issue we fear could impede efforts with respect to PARP market share."
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