Jefferies: Move In Melinta Is 'Overdone'

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Jefferies: Move In Melinta Is 'Overdone'

Jayson Derrick 6/19/2019 2:28:30 PM

Shares of Melinta Therapeutics Inc (NASDAQ: MLNT) shares were gaining more than 200% Wednesday, but a Jefferies analyst said the move is 'overdone.'

The Analyst

David Hoang maintained a Hold rating on Melinta Therapeutics with an unchanged $5 price target.

The Thesis

Melinta's stock skyrocketed after the Food and Drug Administration accepted a supplemental New Drug Application for Baxdela.

The FDA's decision was expected and supported by a clinical trial showing non-inferiority against moxifloxacin on early clinical response, Hoang said in a Wednesday note. (See his track record here.)

Baxdela cleared the non-inferiority efficacy bar with no notable issues related to safety, and a potential launch in early 2020 is now likely, the analyst said.

Yet Baxdela will likely be used mostly in severe and hospitalized cases of community-acquired bacterial pneumonia, and it remains unclear if oral Baxdela will see any notable activity within the outpatient community, Hoang said. As such, the company could see peak sales of $133 million in 2028, he said - meaning Baxdela is 'not expected to be a significant value driver.'

Finally, Melinta needs to execute on the launch of Baxdela in acute bacterial skin and structure infections over the next two quarters in order to unlock value so it can meet its debt covenants on net sales for fiscal 2019 and 2020, according to Jefferies.

Bottom line, Melinta's stock gain could be seen as an overreaction, since Baxdela's approval and launch by 2020 were 'largely baked-in and therefore ... a non-catalyst,' the analyst said.

Price Action

Melinta shares were up 224.24% at $6.43 at the time of publication Wednesday.

Related Links:

Melinta Therapeutics Shares Up 200% After FDA Accepts sNDA For Bacterial Pneumonia Drug

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