Roth starts Chiasma at buy; PT $16

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Roth Capital Partners initiated coverage of Chiasma (NASDAQ:CHMA) with a “buy” rating and $16 price target. The stock closed at $3.87 on Feb. 15.

“With two Phase 3 readouts on the horizon, Chiasma is a fallen angel ready to soar back into the acromegaly market,” writes analyst Yasmeen Rahimi. She notes that Chiasma’s valuation has fallen about $180-million since April 2016, when the company received a complete response letter from the FDA.

Acromegaly is a rare disease caused by the overproduction of growth hormone by the pituitary gland, with the underlying cause typically a benign. Somatostatin analogs (SSAs) are the mainstay treatment for acromegaly, with the market leader, Sandostatin, being an injectable octreotide. However, injectable SSAs carry a significant burden, with injection-site pain and reactions, reported loss of independence and missed work due to chronic injections, and GI effects.

Chiasma's lead asset is Mycapssa, an oral octreotide capsule. It has completed one successful 28-week Phase 3 trial (CH-ACM-01) and will report its 36-week, placebo-controlled Phase 3 trial (CHIASMA OPTIMAL) in September 2019, Ms. Rahimi said.

“Ahead of this key binary event, we performed an in-depth data analysis, with a strong conviction of positive results,” she added.

“We view the open-label CH-ACM-01 Phase 3 trial results as a strong read-through to OPTIMAL, which is 90% powered to show a 45% response rate … and should be further helped by an extremely small anticipated placebo response rate.” The FDA label for Sandostatin (octreotide injectable) claims a 49% responder analysis.

“With positive results from CH-ACM-01 and OPTIMAL, Chiasma plans to file an NDA in late 2019,” she said.

Stephen Kilmer