Stifel starts Xenon Pharma at buy

Stifel initiated coverage of Xenon Pharmaceuticals (NASDAQ:XENE) with a “buy” rating and $18 price target. The stock closed at $8.35 on Oct. 20.

Analyst Stephen Willey writes that Xenon has successfully leveraged its Extreme Genetics drug discovery platform, which identifies single-gene defects responsible for severe human phenotypes, into a maturing pipeline of both partnered and wholly-owned product candidates on the precipice of achieving proof-of-concept inflection points.

“We believe Xenon’s expertise in the discovery/development of highly-selective compounds, targeting difficult-to-drug human channelopathies, is considerably underappreciated from a valuation perspective, with its most-advanced Genentech collaboration likely establishing best-in-class medicinal chemistry solutions for the increasingly competitive pursuit of highly-selective voltage-gated sodium channel antagonists against Nav1.7,” he added.

Mr. Willey said proof-of-concept Phase 2 data read-outs for XEN801 in the first quarter of 2017 and TV-45070 in the first half next year provide meaningful sources of near-term upside.

"Any additional visibility emerging from the Genentech collaboration and Xenon’s progress in identifying selective Nav1.6 antagonists responsible for rare/intractable childhood epilepsy serve as longer-term valuation levers,” he added.