Replimune's Lead Asset Likely To Clear Regulatory Hurdle, Wedbush Says In Bullish Initiation

Replimune Group Inc REPL's lead asset is expected to quickly pass through development and clear the FDA hurdle, according to Wedbush. 

The Analyst

Robert Driscoll initiated overage of Replimune, which went public in July 2018, with an Outperform rating and $24 price target. 

The Thesis

Small-cap biotech Replimune's lead asset RP1, a genetically modified herpes virus that serves to boost the virus' ability to kill tumor cells, is likely to be successful, Driscoll said in the Wednesday initiation note. (See his track record here.) 

The candidate could potentially rapidly move toward regulatory approval in cutaneous squamous cell carcinoma, or CSCC, with significant upside potential in additional tumor types, the analyst said. 

The investigational virus strain is currently in the first part of a Phase 1/2 study as a monotherapy and in combination with Bristol-Myers Squibb Co BMY's Opdivo, he said. 

RP1 will be evaluated in four indication-specific cohorts with Opdivo in a study beginning in the second quarter of 2019, Driscoll said. 

The analyst said he expects an initial readout from the study in the second half of 2019.

A pivotal Phase 2 study evaluating RP1 in CSCC patients in combination with Regeneron Pharmaceuticals Inc REGN's anti-PD-1 cemiplimab is likely to be initiated in the first half of this year, he said. 

"We note CSCC patients will be included in one of the open-label Ph 1/2 cohorts, allowing an early read into potential success for this study." 

Replimune's second asset RP2 builds on the RP1 backbone with the addition of a gene encoding an anti-CTLA-4 antibody, and the third asset RP3 builds on R2, according to Wedbush. 

The Price Action

Replimune shares have jumped over 50 percent year-to-date and were trading up by nearly 10 percent at $16.85 at the time of publication Thursday. 

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