Merus stock a 'buy' for Goldman, driven by peto's market potential in HNSCC

EditorEmilio Ghigini
Published 21-11-2024, 02:34 pm
MRUS
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Thursday saw Goldman Sachs (NYSE:GS) initiate coverage on Merus N.V. (NASDAQ: NASDAQ:MRUS) stock with a Buy rating and a price target of $73.00. The firm's analysis highlighted the potential of Merus's lead asset, petosemtamab, in treating head and neck squamous cell carcinoma.

The Goldman Sachs report emphasized the impressive Phase 2 trial results for petosemtamab, also known as peto, which showed a 67% objective response rate (ORR) in first-line treatment. The firm noted that even when adjusting for trial differences with a competitor's study, peto maintained a significant ORR advantage, suggesting strong efficacy.

The analyst compared peto favorably against other treatments such as ficerafusp, antibody-drug conjugates (ADCs), and multikinase inhibitors. While recognizing the efficacy of some ADCs and multikinase inhibitors, the report pointed out that these often come with higher toxicity levels.

In contrast, peto, combined with pembrolizumab, appears to demonstrate a best-in-class safety and efficacy profile, especially for treating HPV-positive patients.

The report anticipates that further updates from the ongoing Phase 2 trial could substantially increase the stock's value. The current Buy rating reflects the analyst's confidence in peto's potential to meet a significant unmet need in the large head and neck cancer market.

Goldman Sachs is looking forward to additional Phase 2 data to solidify their evaluation of petosemtamab's market position. The next set of results could further support the drug's standing as a leading therapy in its class and its commercial prospects.

In other recent news, the U.S. Food and Drug Administration (FDA) extended the Prescription Drug User Fee Act (PDUFA) goal date for the review of Merus N.V.'s Biologics License Application for zenocutuzumab, a cancer treatment. The new goal date, set for February 4, 2025, allows the FDA more time to review additional information provided by the company.

On the clinical front, Merus has initiated a Phase 3 trial for petosemtamab, a therapy for patients with previously untreated head and neck cancers. This trial, named LiGeR-HN1, is assessing the efficacy of petosemtamab combined with pembrolizumab.

In terms of analyst coverage, UBS has initiated coverage on Merus with a Buy rating, projecting petosemtamab's risk-adjusted peak sales at $880 million. Similarly, BMO Capital Markets maintained an Outperform rating for Merus, indicating confidence in the company's prospects.

These recent developments highlight the ongoing progress and potential of Merus in the oncology field. The company also announced the appointment of Dr. Fabian Zohren as its new Chief Medical (TASE:PMCN) Officer.

InvestingPro Insights

Merus N.V.'s (NASDAQ: MRUS) financial profile offers additional context to Goldman Sachs' bullish outlook. According to InvestingPro data, the company's market capitalization stands at $2.94 billion, reflecting significant investor interest despite its current unprofitability. The stock has demonstrated strong performance, with a remarkable 81.45% total return over the past year, aligning with the positive sentiment surrounding its lead asset, petosemtamab.

InvestingPro Tips highlight that Merus holds more cash than debt on its balance sheet, which is crucial for a biotech company investing heavily in research and development. This financial stability supports the ongoing clinical trials for petosemtamab and other pipeline products. Additionally, analysts anticipate sales growth in the current year, potentially driven by the promising results of petosemtamab in treating head and neck squamous cell carcinoma.

It's worth noting that InvestingPro offers 14 additional tips for Merus, providing a comprehensive analysis for investors interested in delving deeper into the company's prospects. These insights can be particularly valuable given the potential market impact of petosemtamab's development progress.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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