Roth starts ArQule at buy; PT $5

buy-button-16.jpg

Roth Capital Partners launched coverage of ArQule (NASDAQ:ARQL) with a “buy” rating and $5 price target. The stock closed at $1.67 on Feb. 21.

“We believe that the value-driving components of the pipeline have been in flux in the last six months, and we foresee a different and favorable value configuration locking into place by the end of 2018,” writes analyst John Marango.

“Our analyses show that out of the broader pipeline, the AKT and BTK inhibitors, may be subject to the largest near-and medium-term value inflections, which could be transformational for the company and its investors,” he added.

Mr. Marango said he is focusing on the configuration and dynamics of valuation, instead of a more traditional discussion of the technology and its data. His ArQule frame covers only three of its programs: the FGFR inhibitor, Derazantinib, in Phase 3 for iCCA; the AKT inhibitor, Miransertib, in Phase 1 for Proteus syndrome; and the BTK inhibitor, ARQ 531, in Phase 1 for CLL.

“We favor an ‘inverted champagne glass’ configuration of the pipeline as it pertains to value: we believe that the later-stage and more visible program (FGFR) holds a slimmer and more fragile value proposition, while the earlier-stage and less visible programs (AKT, BTK) hold a disproportionately wider and lower-risk value proposition,” he added.

Through 2018, he is guiding investors to keep an eye on the initial data from the first cohort of the Phase 1 study of ARQ 531 in refractory B-cell tumors, likely at AACR on April 14 and/or ASCO on June 1, followed by more cohort updates later in the year; publication of full data from the NIH Phase 1 study of Miransertib in Proteus and from compassionate use programs, as well as clarity on a regulatory strategy and timetable; and recruitment of enough patients required for an interim analysis in the Phase 3 study of Derazantinib in iCCA, likely by the end of 2018, allowing an interim look in first half of 2019.