Roivant Sciences stock moved lower on Monday after the biopharmaceutical company announced that its lupus therapeutic oral brepocitinib failed to meet the primary endpoint in a Phase 2 study.
The company said it plans to continue progressing the drug in other indications outside of Systemic Lupus Erythematosus (SLE) given its favorable safety and tolerability profile, six other positive Phase 2 studies, and the active arm performance of this study.
“We saw some of the highest SRI-4 responder rates ever observed in a lupus study in the active arm of this trial, along with a favorable safety and tolerability profile,” Roivant CEO Matt Gline said in a statement.
“Unfortunately, we also saw the highest placebo response rate observed in any significant SLE study, and as such it was not possible to truly assess the impact of the drug, or to establish sufficient differentiation from other therapies in lupus patients.”
Jefferies analysts noted that the results from the Phase 2 study were not “totally surprising” as they were skeptical and had forecast just a 35% probability of success.
They wrote in a note to clients that Roivant’s story is around bowel disease and what assets the company can bring in to expand its pipeline in 2024 and prove to investors that it is able to turnaround assets into return on investment.
“The stock has indeed pulled back and sentiment reflects this uncertainty, but we'd be buyers especially as Roivant moves past risky catalysts and we expect a potential rally since the stock is cheap and trading as if Roivant will burn two years of cash without any value creation.”
The analysts wrote that the Phase 2 lupus data was one of these “risky catalysts” and that the trial indeed failed to hit statistical significance, which investors have generally been skeptical of this year and hence zero value in buyside models.
“Thus, from a fundamental perspective, there should be minimal downside on the failed Phase 2 though we appreciate biotech sentiment continues to be challenging and there could be a sentiment trade on the negative headline,” they wrote.
The analysts reiterated their ‘Buy’ rating on the stock and a US$16 price target.
Roivant shares traded 3.5% lower at US$8.81 at noon on Monday.
Contact the author at emily.jarvie@proactiveinvestors.com
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