Janney Weighs in on Acceleron Pharma

On Monday, Acceleron Pharma Inc. (NASDAQ: XLRN) announced equity financing estimated of about $150 million. Now, Janney Capital has weighed in on this biotech company and what its outlook stands to be for the future.

The firm’s model projects sufficient cash into 2018, this financing not included. However, Janney doesn’t project intensive development costs for the muscle programs (ACE-083, -2494). The company projects cash into the second half of 2019 post-financing. The firm is remaining neutral mainly pending clinical plans for sotatercept (expected in the first half of 2016) and for ACE-083 (Phase 2 start in second half of 2016).

In Janney’s report, the firm said:

Room for upside, but looking for details on next steps. The filing appears to focus on ACE-083, which is part of the muscle program we haven’t considered in our valuation. We want to see the phase 2 design for facioscapulohumeral dystrophy (FSHD) and more details for ACE-2494, the first of the IntelliTrap candidates. ACE-2494 is also part of the muscle program and expected to enter the clinic by YE16. FSHD might be a more accessible condition given its relatively limited reach. It doesn’t appear to affect the diaphragm or heart, for example. However, we want to see what is an acceptable endpoint/outcome for the clinical studies.

And, sotatercept might be the one to watch in 1H16. We also haven’t included sotatercept in our valuation in anticipation of clarity on the positioning for this agent in chronic kidney disease. Admittedly, sotatercept is essentially a “free option,” with Acceleron having the potential to earn milestones and 20%+ royalties, while Celgene absorbs all the future development and commercialization costs. We just need a better sense of what the companies have in mind for development and expect this could occur with FDA feedback in 1H16.

Acceleron’s lead candidate is luspatercept, also Celgene-partnered, which is currently in Phase 3 testing for beta thalassemia and for myelodysplasia (MDS). Janney is particularly encouraged by the MDS data, showing good transfusion independence rates of 37% to 42% and a strong safety profile.
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The firm ended the report saying:

And dalantercept, but also observant of risk. Dalantercept also appears promising, with efficacy data comparable or better than that recently reported for the investigational agents nivolumab and cabozantinib in kidney cancer and we look forward to data in additional patients around YE16. For dalantercept, we give a 30% probability of success in phase 3 in kidney cancer, which of course could prove conservative, but with 29 patients worth of data so far in phase 2, we believe is prudent at this stage.

Shares of Acceleron traded down 5.8% at $42.26 on Tuesday, with a consensus analyst price target of $57.29 and a 52-week trading range of $20.00 to $50.86.