Big Implied Upside for Ambit as Analyst Quiet Period Ends

The stock opened at $8.00 on the IPO date, and it was only on last Friday that the stock managed to rise above the first day’s closing price of $7.39. It seems as though the underwriting analyst quiet period is playing the bulk of the role for the interest after a positive drug study review last week.

At the IPO, Ambit sold 8,125,000 shares of common stock at $8.00 per share. Volume has been very weak since the IPO, but the stock is now currently up almost 3% at $8.02 in the first hour of Monday’s trading, and this puts it within striking distance of the $8.24 post-IPO high. The analyst community has been positive in the formal ratings, but the implied upside may be more than 50% if these analysts are correct.

• BMO Capital Markets started coverage at Outperform with a $10 price target.
• Citigroup started coverage with a Buy rating and issued a $13 price target.
• Leerink Swann started coverage at Outperform with $14 price target.
• R.W. Baird started coverage with an Outperform rating and a $14 price target.

This culminates the ratings from all four firms in the underwriting syndicate. All ratings are very positive, with the lowest projected upside to the price target being more than 25%. If you take a mean consensus price target of the four analysts, you get an consensus price target of $12.75. That in turn implies upside of more than 50% from the group of analysts.

Ambit’s lead drug candidate is called Quizartinib and was given a positive presentation at the recent American Society of Clinical Oncology (ASCO) annual meeting. The phase II trial was positive and Ambit sees phase III trials starting in early 2014. This is the company’s investigational once-daily inhibitor of FMS-like tyrosine kinase-3 for patients with relapsed/refractory acute myeloid leukemia and in newly diagnosed AML patients in combination with chemotherapy.