MacroGenics (NASDAQ:MGNX) more than doubled Wednesday, from $11 to $25 per share, on positive news from its Phase-III trials. As of this writing, MGNX stock is up 130%.
The positive trial data comes from its “Sophia” study of margetuximab, a breast cancer treatment. Margetuximab, MacroGenics’ “immune-enhancing” antibody, met its primary endpoint in late-stage breast cancer patients with HER-2, or human epidermal growth factor receptor 2, a mutation creating excess HER-2 proteins.
Some patients in the trial were given margetuximab in combination with chemotherapy, while others were given trastuzumab with chemo. The patient population that received margetuximab saw a 24% risk reduction in progression-free survival (PFS). But patients who carried the CD12A 158F allele experienced a 32% risk reduction when given the combination that included margetuximab …
The full context of these results is expected to be published (and presented at a “major scientific convention”) sometime this year.
The Investment Case
The biotech sector depends on these clinical trials and approvals, which makes relatively unknown drug stocks like MGNX pure speculative bets. The closer to market a drug is, and the more potential impact that drug has, the more bullish the case for the stock. In MacroGenics’ case, it has several treatments in its pipeline, with margetuximab being the closest to market. That’s good, because MacroGenics hasn’t had a profitable quarter since 2012 …
On average, analysts expect MGNX to post negative per-share earnings of $4.28 this year, so anyone invested in MGNX is chomping at the bit for good news. Today, they got it.
Will it last? Hard to say, but I’m skeptical of any single-day 130% rally, especially with how choppy the market has revealed itself to be in recent months. If there’s one thing we can count on, it’s that people are crazy, and these gigantic moves can be HUGE opportunities.
H.C. Wainwright analyst Debjit Chattopadhyay believes the sky is the limit, releasing a bullish note on MGNX Wednesday:
“Our 12-month, $39 (raised from $34) price target for shares of MacroGenics is based on a 13-year DCF-driven sum-of-the-parts analysis and in light of the recent clinical update, we have raised the POS of an anticipated treatment duration of 6 months. Our DCF is driven by: beta of 1.73, terminal growth rate of 0.5%, risk premium of 4.93%, calculated WACC of 11.4%, and tax rate of 15% beginning in FY 2027. (19%), flotetuzumab (17%) together represent about 99% of our target.”
Chattopadhyay sees MacroGenics stock hitting $39 per share in 12 months — a gain of 50.2% from its current perch of $25.95. The average price target on MGNX stock, however, is $22.50. There’s a chance analysts will revise their price targets in the coming days, but that doesn’t make this stock any less of a risky proposition.
Of course, the big takeaway here is that MacroGenics will likely be submitting a Biologics License Application, which if approved, puts the company on track to squeeze some revenue out of its pipeline.
John Kilhefner is the Deputy Managing Editor InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.
