Egalet EGLT-NASDAQ BUY PRICE TARGET US$18.00

 

Egalet
EGLT-NASDAQ
BUY  PRICE TARGET US$18.00↑ from US$12.00 Price (23-Jan) Ticker US$8.54
Raising Target Price Major catalyst mid-2015 with EGLT-002; higher confidence based on positive EGLT-001
Head-to-head study vs. Purdue major catalyst, expect data by mid-2015 We expect positive results for EGLT-002 (abuse-deterrent oxycodone) by mid-2015 from a Category 3 likeability study head-to-head versus Purdue’s Oxycontin OP, which should move shares substantially higher.
Validation of Egalet’s Guardian Technology from the Category 3 study with EGLT-001 gives us higher confidence for positive results from EGLT-002. Both drugs use a polymer API-based matrix and utilize the same injection molding manufacturing process. Importantly, EGLT-002 uses a two-part abuse deterrent technology, which may be even more robust vs. EGLT-001’s one-part technology.
Finally, the recent withdrawal of Remoxy by Pfizer significantly reduces competitive risk for EGLT-002, which we believe puts the company in a strong competitive position. EGLT-001 demonstrates significantly lower abuse potential vs. MS Contin, positive for EGLT-002 Top-line results from the Category 3 abuse-deterrent human abuse liability (HAL) study for EGLT-001 showed significantly lower potential for abuse vs. manipulated MS Contin, a positive in giving further validation of the company’s Guardian Technology. EGLT-001 continued to retain its abuse-deterrent characteristic after severe manipulation, where there was no statistical difference between the drug liking scores (as measured by Emax) between the intact and manipulated formulation. We remind investors that FDA recently required the company to modify its Category 3 study design, based on the very high level of abuse deterrence seen with EGLT-001. Phase 3 data for EGLT-001, EGLT-002 due 1H16 EGLT plans to initiate a Phase 3 study for EGLT-001 in 1Q15, and for EGLT-002 in 1H15, with Phase 3 data expected for both studies during early 2016. We expect both studies to be positive, given similar AUC for EGLT-001 and EGLT-002 versus MS Contin and Oxycontin OP. We remind investors that AUC is the critical factor in pain relief for longacting opioids.
Increase price target to $18
BUY rating We increase our price target to $18 and maintain our BUY rating as we have higher confidence in seeing a positive result from the Category 3 EGLT-002 study and phase 3 EGLT-001 clinical study. In our NPV valuation, we increase our probability adjustment of EGLT-001 and EGLT-002 to 65% and 50%, respectively, from 50% and 35%
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