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Biotech's Target Price Increased as Shares 'Deeply Undervalued'
Research Report

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Wedbush analyst Robert Driscoll provided an update on the lead asset of this drug developer targeting cancer.

A Nov. 9 Wedbush research report indicated that Sierra Oncology Inc. (SRRA:NASDAQ) is expected to release initial clinical data from two Phase 1 studies of lead candidate SRA737, "a highly selective checkpoint kinase 1 inhibitor." in Q1/18. "We think an update on SRA737's safety profile will be meaningful, as well as on dosing strategies in the combination study," reported analyst Driscoll. Interim data from those trials are anticipated in mid-2018.

Today, with those initial results due in the short term, Sierra Oncology's shares are "deeply undervalued," Driscoll noted. "We are raising our price target to $5 (from $4) to reflect our increased confidence in likely strong interim data in 2018 that could point to an accelerated path to approval." The company is currently trading at around $2.02 per share.

In a recent gathering, key opinion leaders from Sierra Oncology's recently formed DNA Damage Response Advisory Committee discussed the biopharmaceutical firm's SRA737. They "highlighted the broad clinical potential" of the checkpoint inhibitor "across multiple tumor types as monotherapy and in combination with multiple potential agents," such as immuno-oncology therapeutics, PARP inhibitors and chemotherapies, wrote Driscoll. The company's therapeutics "target DNA-damage response pathways in cancer patients."

Because of the "strong clinical rationale for multiple therapeutic strategies" for SRA737 and it being further advanced, Sierra Oncology has chosen to focus on clarifying the development plan for that asset and defer submitting an investigational new drug application for its CDC7 inhibitor, SRA141, Driscoll said.

The research report also contained a brief summary of the company's Q3/17 financials. Sierra Oncology posted a net loss of $10M ($0.19 per share), "above our estimate of ($0.21) on lower-than-expected operating expenses," indicated Driscoll. At quarter's end, it had $107.8M in cash and cash equivalents, which it "believes to be sufficient to fund ongoing operations through mid-2019."

Wedbush has an Outperform rating on Sierra Oncology.

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