ESSA Pharma downgraded by Oppenheimer, Piper Sandler after drug setback in trials
Investing.com -- ESSA Pharma (NASDAQ:EPIX ), a biotechnology company focused on developing treatments for metastatic castration-resistant prostate cancer, saw its stock downgraded by major brokerages Oppenheimer and Piper Sandler after the company said it was halting development of its lead drug candidate, masofaniten.
This decision followed a futility analysis during a Phase II clinical trial, where masofaniten, combined with the existing anti-cancer drug enzalutamide, was being evaluated against enzalutamide alone.
The interim findings suggested that the combination treatment did not meet the efficacy benchmarks required to justify continued testing, leading ESSA to pivot its strategic focus away from masofaniten.
Oppenheimer responded to the news by downgrading ESSA’s stock rating to "perform," removing its previous price target of $17.
The brokerage’s analysts indicated that ESSA now faces challenges in reshaping its future without its main drug candidate in active development.
Previously, masofaniten represented a central hope for ESSA in capturing a portion of the mCRPC treatment market by potentially providing improved outcomes when paired with enzalutamide, a widely used therapy in this field.
However, the trial results showed little distinction between the efficacy of the masofaniten-enzalutamide combination and enzalutamide alone, undermining the clinical value of ESSA’s drug.
Consequently, Oppenheimer’s updated stance reflects the uncertainties and risks facing ESSA, as the company evaluates alternative pathways to preserve shareholder value.
ESSA’s cash balance of $126.8 million does provide it with some financial flexibility, which could be deployed toward acquisitions, partnerships, or even a merger with another oncology-focused company to establish a fresh trajectory.
Similarly, Piper Sandler downgraded ESSA’s stock to "neutral" from "overweight" and revised its price target sharply downward to $2 from $15.
Piper Sandler said that the company’s valuation now primarily hinges on its cash reserves, projected at roughly $105 million by the end of 2025.
Piper’s downgrade was also fueled by the disappointing performance of masofaniten in the Phase II trial.
Despite initial promise, the trial data revealed that the control arm, which received only enzalutamide, met or exceeded response rates historically associated with this treatment, with PSA50 and PSA90 response rates (indicators of prostate-specific antigen reduction) nearly identical between the combination treatment and enzalutamide alone.
Such findings raised questions about the added benefit of masofaniten, leading ESSA to abandon the drug’s development. In light of these results, Piper Sandler removed any projected value for masofaniten from ESSA’s valuation and advised that the company would need to explore other strategic alternatives to maintain investor interest.
The situation with masofaniten, which was expected to fill a critical treatment gap in advanced prostate cancer, underscores a significant setback for ESSA Pharma.
The company’s pipeline was heavily focused on developing masofaniten as an "antiten" drug, targeting the androgen receptor, a known driver in prostate cancer progression.
ESSA had designed the Phase II trial to test masofaniten in combination with enzalutamide among patients with mCRPC who were naïve to second-generation anti-androgens.
Initial results had shown promise in earlier trials, leading to optimism within the company and among investors.
However, the recent analysis provided by ESSA’s research team found that enzalutamide alone was performing at unexpectedly high levels of efficacy, challenging the perceived need for a combination treatment with masofaniten.
The findings also suggested that advancements in diagnostic techniques, including the more routine use of PSA-PET scans, might be capturing patients earlier in the disease continuum, enhancing the response rates observed with enzalutamide alone.
With masofaniten now sidelined, ESSA Pharma must regroup and determine a viable path forward.
The company’s leadership has initiated a review process to assess opportunities, which may include in-licensing of new assets, partnerships, or a merger with another firm.
These potential strategies are essential for ESSA as it looks to stabilize its outlook and refocus investor expectations after the abrupt clinical halt.
The cash reserves remaining from prior funding rounds will be crucial as ESSA navigates this challenging period, providing it with some leeway to identify and invest in new growth avenues.
Source: Investing.com
