Roth resumes coverage of Aptose at buy, PT $5

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Roth Capital Partners resumed coverage of Aptose Biosciences (TSX:APS) with a “buy” rating and $5 price target. The stock closed at $1.43 on Oct. 23.

Analyst Jotin Marango writes that Aptose shares and investors have been through the wringer in the last two years, due to an enduring clinical hold on its original lead agent, APTO-253, a c-myc inhibitor for acute myelogenous leukemia (AML), after first formulation, and then manufacturing issues.

“We believe that by now most of the Street may have written off APTO-253 entirely, although in our view, this is still a good drug, whose setback was not related to its efficacy or safety,” he added.

Based on quarterly updates over the last year, he said the company might now be close to wrapping up its corrective action on APTO-253 manufacturing, allowing it to re-engage the FDA, and potentially return to the clinic around mid- next year.

While working to reboot the APTO-253 program, Mr. Marango said Aptose has ramped up a second program, CG-806 (pan-FLT3 and BTK inhibitor for AML and CLL), expected to enter the clinic also in 2018.

“In our view, both agents are mechanistically, biologically, and clinically relevant in today’s AML landscape,” he said, adding that he likes the layered risk/reward thesis on Aptose: APTO-253 may generate short-term upside around the first half of 2018 due to sudden restoration of its clinical program, while CG-806 becomes a hedge by drawing a value floor with its upcoming IND.