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Coverage Initiated on Gene Therapy Company
Research Report

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Analyst David Nierengarten with Wedbush explained the rationale for adding this biotech to his coverage universe.

Nierengarten initiated coverage of Nightstar Therapeutics Plc (NITE:NASDAQ) with an Outperform rating and $29 per share 12-month price target, according to an Oct. 23 research report. This clinical-stage, London-based biopharmaceutical firm "is developing gene therapies for the treatment of rare ophthalmic conditions."

Nightstar has two clinical assets. One is NSR-REP1, a treatment for choroideremia (CHM), a rare genetic retinal disease for which there are "no other approved therapies," Nierengarten indicated. The therapy is "set to enter a Phase 3 registrational trial in H1/18 in 140 CHM patients," with one-year follow-up data anticipated in 2020. "Continued clinical success of lead candidate NSR-REP1 in CHM" is the primary value driver of Nightstar.

As for the mechanism of action, the analyst added that NSR-REP1 "works by restoring endogenous, wild-type production of the genetically defunct REP1 protein. This offers curative potential by halting the disease progression or improving visual function in patients who would otherwise invariably go blind."

The second clinical candidate, NSR-RPGR, "provides appreciable upside to our valuation," Nierengarten wrote. It is a treatment for X-linked retinitis pigmentosa (XLRP), another inherited retinal disease. The therapy is currently in a "Phase 1/2 dose-ranging trial (XIRIUS) with targeted enrollment of 24 XLRP patients and preliminary data expected in 2018." In the case of NSR-RPGR, it induces production of the "genetically defunct RPGR protein," which, left untreated, would result in blindness.

Nightstar also has a lead preclinical candidate, NSR-BEST1, which is a therapeutic for another genetic eye condition called Best disease.

The gene therapy firm has the advantages of "worldwide market exclusivity and large development leads over competition," Nierengarten purported. "The company retains worldwide rights to all its product candidates. NSR-REP1 for CHM is approximately two years ahead of second-in-class candidate SPK-7001 while NSR-RPGR for XLRP is about six months ahead of second-in-class candidate A004." NSR-BEST1 is "the only such disclosed candidate in development."

As for the significance of potential firsts for Nightstar, Nierengarten said that "first-in-class status is critical for gene therapy products, where a single injection has curative potential. Also, since all product candidates target rare diseases, the first-to-market advantage is amplified."

Wedbush derived its $29 per share price target "based on an eight multiple of projected U.S. and EU5 sales for NSR-REP1 in 2024 and NSR-RPGR in 2026 in newly diagnosed patients, plus the net present value of sales in existing patients," wrote Nierengarten. Nightstar's stock is currently trading at around $18.75 per share.

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