Tuesday, JPMorgan upgraded Mersana Therapeutics stock (NASDAQ:MRSN) from Underweight to Neutral, setting a price target of $5.00. The firm cited a more favorable outlook for the company's XMT-1660 program, a B7-H4 antibody-drug conjugate (ADC), which is expected to provide updates by midyear.
According to JPMorgan's assessment, recent data from competitors presented at last year's European Society for Medical Oncology (ESMO) conference has partially derisked the program.
Mersana's XMT-1660 is being closely watched for its potential to treat breast and ovarian cancers. While the company's UpRi program faced setbacks last year, the upcoming data for XMT-1660 is seen as a pivotal moment to renew investor interest in Mersana's ADC portfolio. JPMorgan highlighted that clinical success, coupled with a clean safety profile, would be vital for improving market sentiment towards the company.
The firm acknowledged several challenges in setting expectations for the upcoming data reveal, including uncertainties about the sample size, the dose range for backfill cohorts, and how the setting compares to historical data from competitors. Despite these challenges, JPMorgan noted that Mersana has been able to escalate the dose beyond DL6 without reaching the maximum tolerated dose (MTD), which is seen as a positive sign.
The validation of B7-H4 as a target by competitors' data suggests promise for addressing breast and ovarian cancers, leading JPMorgan to update its financial projections for Mersana. The firm now assumes un-risk-adjusted peak sales of $521 million for triple-negative breast cancer (TNBC) and $444 million for platinum-resistant ovarian cancer (PROC).
The upgrade reflects JPMorgan's reassessment of Mersana's potential, although the firm also mentioned that the current stock price appears to be near full value. The midyear data readout will be an important indicator of XMT-1660's clinical profile and its ability to differentiate from other B7-H4 targeting therapies in development.
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