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Cantor Fitzgerald
Equity Research
November 13, 2018
BIOTECHNOLOGY
ProQR Therapeutics N.V. (PRQR - Overweight, Target: $40.00)
Usher-ing in upside with data in Usher Syndrome in 2019; Initiate at Overweight, $40 PT
Initiating Coverage
Investment Summary. Initiating at OW and $40 12-month PT. ProQR is a European RNA-based platform technology company focused on developing therapeutics for inherited blindness. Although shares are up close to 500% YTD (vs. XBI down 9%) after positive proof of concept in first ophthalmology drug QR-110, we think this could be just the beginning of a major turning point for the company’s platform. In September, ProQR established the first proof of concept for its RNA platform in inherited ophthalmology with lead asset QR-110. We think QR-110 could be just the tip of the iceberg in terms of PRQR’s platform potential in inherited forms of blindness. In this report, we are focused on the company’s next clinical program in Usher’s Syndrome which represents a larger opportunity than QR-110 (we estimate $1.1B peak vs. $300M peak) and is guided to have clinical data in 2019.
· We think LCA10 data provided not only positive data but also gives us increased confidence in platform capability and the next drug in clinic, QR-421a. Lead asset, QR-110, is targeting an ultra-rare genetic eye disease called Leber’s congenital amaurosis type-10 (LCA10). We believe that QR-110's proof-of-concept study provided compelling evidence of efficacy and we estimate peak sales of $300M. Almost as important as the compelling LCA10 data, we think that this proof-of-concept data gave us reason to believe that Usher’s Syndrome and other ophthalmology indications may be successful using this platform technology. Key reasons we discuss in this report: 1) same delivery, chemistry, safety and PK/PD profile as QR-110, 2) both programs target proteins in the cilia in the retina, 3) USH2A patients have more retinal cells intact than LCA10 patients.
· USH2A clinical data in '19 could be a major value driver. We think it is underappreciated by investors making risk/reward attractive into the readout: Shares could trade +150-225% (to ~$47-$62) vs. -30-60% ($8-$13/sh). Mutations in the USH2A gene lead to blindness due to lack of a protein called usherin. QR-421a is an exon skipping approach that could lead to increased truncated usherin. QR-421a is moving into patients by early '19 and we expect initial data in mid to 2H2019. If QR-421a is successful, we think it could sell $1.1B+ at peak which is a nearly a ~4x larger opportunity than QR-110 ($300M).
· Inherited ophthalmology diseases where PRQR’s platform is focused represent a very large opportunity. We estimate $4.5B+ in peak unadjusted sales across PRQR’s disclosed clinical and preclinical targets. ProQR will have two programs in clinical development by early '19 and is guiding for more to enter the clinic over the next 12-18 months. At ~$750M in cap, we think current levels give credit for the LCA10 opportunity, but not the platform’s potential including QR-421a which is guided to have proof of concept data in 2019.