GOSS - Gossamer Bio selloff is an overreaction - Piper Sandler

Gossamer Bio ( NASDAQ: GOSS ) announced Phase 2 data for its candidate for pulmonary arterial hypertension (PAH) seralutinib on Monday, sending its shares to an all-time low in a selloff Piper Sandler identified as an overreaction.

Topline data from the TORREY study showed that a dry powder inhaled version of the tyrosine kinase inhibitor reached the primary endpoint, indicating a placebo-corrected improvement of 14.3% for pulmonary vascular resistance (PVR) from baseline to week 24.

Meanwhile, the secondary endpoint of the six-minute walk distance (6MWD) showed a mean difference of 6.5 meters from baseline to Week 24, favoring the seralutinib arm.

Piper analysts led by Yasmeen Rahimi argued that Street overacted to the readout due to lower-than-expected PVR and 6MWD results even as seralutinib showed “consistent alignment across key efficacy measures,” underscoring its activity in PAH.

Citing Gossamer’s ( GOSS ) conference call today, Rahimi and the team noted management expectations that TORREY will allow them to properly power 6MWD as the primary endpoint in a future Phase 3 trial.

The management rules out enrollment challenges for a pivotal global study expected to start in H2 2023 despite the potential U.S. approval of rival therapy sotatercept developed by Acceleron Pharma which Merck ( MRK ) acquired in 2021.

“….as a global study, they do not foresee any enrollment issues, especially as ex-U.S. geographies still will not have access to sotatercept,” the analysts reasoned with an Overweight rating and a $15 per share target on Gossamer ( GOSS ).

Meanwhile, in reaction to sotatercept data, Aerovate Therapeutics ( NASDAQ: AVTE ), which is advancing a dry powder inhaled formulation for PAH called AV-101, dropped even as BTIG upgraded the stock to Buy from Neutral, noting the strength of Gossamer’s ( GOSS ) readout.

The analyst Julian Harrison argues that TORREY data validates the potential of DPI formulations of tyrosine kinase inhibitors as a “safe and technically viable approach” to treat PAH.

However, seralutinib “likely does not put pressure on the AV-101 opportunity at this time,” given the PVR reduction of about 14% in the study, analyst Julian Harrison wrote with a $27 per share target on Aerovate ( AVTE ).

Wall Street has remained bullish on Gossamer ( GOSS ) stock, with an average rating of Buy from analysts, while Seeking Alpha Authors and SA’s Quant System, which consistently beats the market, rated GOSS as a Hold.

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