Ladenburg starts Tocagen at buy; PT $20


Ladenburg Thalmann launched coverage ofTocagen (NASDAQ: TOCA) with a “buy” rating and $20 price target. The stock closed at $8.81 on June 26.

TOCA is developing a novel viral gene therapy for cancer and has developed a retroviral replicating vector (RRV) platform to selectively deliver therapeutic genes in tumor cells. 

Analyst Wangzhi Li writes that the company’s lead program, Toca 511 & Toca FC, delivers cytosine deaminase to convert pro-drug 5-fluorocytosine to active 5-Fluorouracil selectively in tumor cells, which kills the tumor cells and also induces an immune response. 

“Toca 511 & Toca FC has shown impressive Phase 1 results with durable complete responses in recurrent high-grade glioma (rHGG), a disease of high unmet need, and has won breakthrough therapy designation from FDA and priority medicine designation from EMA,” he added.

Toca 511 & Toca FC also has attracted a licensing partner for Greater China rights with $16-million upfront and $115-million in potential milestones. 

Mr. Li said Toca 511 & Toca FC is in ongoing Phase 3 pivotal trial in rHGG, with a potential NDA filing in 2019. Toca 511 & Toca FC also is in a Phase 1 trial in other solid tumors and expects to start a trial in newly diagnosed HGG in 2019. 

Tocagen’s second lead program, Toca 521, uses the RRV to produce aPD-L1 scFv selectively in tumors, with a potential IND filing in late 2018 or 2019, he added. 

“Tocagen is currently traded at a market cap of about $180-million, while our model indicates a valuation of $460-million-plus,” Mr. Li said. “We believe Tocagen presents an attractive investment opportunity, with multiple upcoming catalysts and significant upside potential.”


Stephen Kilmer