Roth starts coverage of Menlo Therapeutics at buy; PT $29

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Roth Capital Partners launched coverage of Menlo Therapeutics (NASDAQ:MNLO) with a “buy” rating and $29 price target. The stock finished at $7.50 on July 23.

Yasmeen Rahimi writes that the company has a Phase 3 asset, serlopitant for prurigo nodularis, with significant upside potential from Phase 2 programs in psoriasis-related pruritus and refractory chronic cough. 

“We believe atopic dermatitis (AD) data that cut Menlo's market cap by some 70% are not read-throughs to psoriasis and refractory chronic cough (RCC) Phase 2 data expected in the fourth quarter of 2018,” she added.

Though the Street may be sceptical from the Phase 2 failure in AD, “we learned from the literature the NK1R pathway is far less important in AD, but key in pruritus-associated psoriasis and RCC,” Ms. Rahimi pointed out. 

Despite two approved NK1 antagonists, aprepitant and rolapitant, for chemo-associated nausea, she favors serlopitant as best in class for several critical pharmacokinetic attributes. “Our valuation rests on prurigo nodularis, and Phase 2 data comfortably [projecting] Phase 3 success in the first half of 2020.” 

Stephen Kilmer