JP Morgan starts Constellation Pharma at OW; PT $17

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JP Morgan initiated coverage of Constellation Pharmaceuticals (NASDAQ:CNST) with an “overweight” rating and $17 December 2019 price target. The stock closed at $9.85 on August 10.

Analyst Anupam Rama writes that using its proprietary epigenetics platform, the company has currently two mid-stage assets in clinical development: CPI-1205, an EZH2 inhibitor for prostate cancer, and CPI-0610, a BET inhibitor for myelofibrosis. 

Epigenetics is a broad regulatory system that controls gene expression and disruption or abnormal epigenetic mechanisms can lead to disease. 

Constellation shares are down about 35% since the IPO in July, which “we believe highlights that the Street needs additional data for both programs,” he added. 

Mr. Rama said both assets have initial signals of activity in a small sample size. However, “we also acknowledge the data need to mature with time (larger studied patient population, longer follow-up, etc.) for increasing validation of target approach/indication.”

In his view, the “downside post-IPO has been overdone, and we believe this creates an interesting/compelling entry point ahead of more robust proof-of-concept data for both CPI-1205/CPI-0610 in mid-2019 (potentially less than about 12 months out.”

Stephen Kilmer