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Hedge Fund Pick Mirati Rallies to Record After Drug Results

Bloomberg logoBloomberg 10/26/2020 Cristin Flanagan

(Bloomberg) -- Mirati Therapeutics Inc., one of the most talked-about names in biotech and a frequenter of Wall Street’s M&A shopping lists, surged to a record on Monday after drug-trial results set a higher bar against a competitor drug from biotech behemoth Amgen Inc.

The experimental drug, known as adagrasib, or MRTX849, produced responses in 45% of lung cancer patients in early stages of study. That’s better than some of the results from Amgen’s sotorasib. Because patients whose tumors shrank on Mirati’s drug are still in treatment, it’s too early to know how long the average response to the drug lasts -- a key metric Wall Street is watching.

The Street had been looking for those responses to last at least 10 months. With Mirati’s stock up more than 150% from March lows before the meeting, there had been some concern that positive results may already be priced in. Shares climbed as much as 17% to a record $210 in Monday’s trading.

For 49 of the 51 lung cancer patients, their cancer didn’t advance during the study. Trial participants had been previously treated with chemotherapy and most had also received an immunotherapy like Merck & Co.’s Keytruda. Of the 23 patients whose tumors shrank with adagrasib, 19 haven’t had their cancer progress, and are still getting treated.

“This is a positive result any way you look at it, especially if you compare it to current standard of care,” Charles Baum, Mirati’s chief executive officer, said in a phone call before the data were made public.

chart: Mirati stock hits a record after positive results, target raises © Bloomberg Mirati stock hits a record after positive results, target raises

Analysts seem to agree. At least two raised their price targets by $100 or more Monday morning following the update. Adagrasib is potentially “best-in-class,” wrote Goldman Sachs analyst Salveen Richter, who raised her price target to $267 from $152. Annual sales of the drug could reach $3.4 billion in lung cancer either by itself or in combination with other medicines, Richter wrote in a client note. Not to be outdone, JonesTrading analysts raised their target to a Street-high $300 from $200.


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Both Mirati and Amgen’s medicines target a mutation on a gene called KRAS found in an estimated 13% of non-small cell lung tumors. These mutations are particularly hard to treat and patients with them have a poorer prognosis. Many on Wall Street are expecting both companies to get accelerated approval for these new drugs. For Mirati, sales of the drug could reach $2.3 billion by 2027, according to five analysts’ estimates compiled by Bloomberg.

Results for one lung cancer patient whose cancer had spread to their brain showed their tumors shrank and a brain lesion disappeared.

Adagrasib data in other tumor types were also presented on Sunday at the EORTC-NCI-AACR Symposium on Molecular Targets and Cancer Therapeutics, though the most promising results to date for these drugs has been seen in lung cancer. The medicine is also being tested in combination with other cancer drugs as well as in earlier lines of treatment.

Mirati plans to seek U.S. accelerated approval of the medicine as a second line of treatment for lung cancer in the latter half of 2021.

(Updates chart and shares)

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©2020 Bloomberg L.P.

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