What Do Versartis' Troubles Mean For Opko Health?

Versartis Inc (NASDAQ: VSAR) shares are slumping even as rival Opko Health Inc. (NASDAQ: OPK) is seeing slight strength, though not proportionate to the sell-off seen in Versartis shares.

News Behind The Move

Versartis announced Thursday after the market close that its Somavaratan, a long-acting form of recombinant human growth hormone for growth hormone deficiency evaluated under the VELOCITY phase 3 clinical trial in pediatric growth hormone deficiency, did not meet its primary endpoint of non-inferiority.

Commenting on the development, Ladenburg said given Versartis' failure, it believes Opko Health and partner Pfizer Inc. (NYSE: PFE) now have an opportunity to be the first-to-market with a long-acting hGH for pediatric patients, which account for over 80 percent of the addressable GHD market.

As such, Ladenburg reiterated its Buy rating and $16 price target for the shares of Opko Health.

At time of writing, shares of Opko Health were rising 0.15 percent to $6.49, but Versartis was plunging 86.16 percent to $2.99.

Versartis Loss, Opko's Gain

Analysts Kevin DeGeeter and James Colby said they expect Opko Health to complete enrollment of the phase III pediatric hGH -CTP program as early as the fourth quarter of 2017, with top-line results expected in the first quarter of 2019. The analysts foresee a potential approval in late 2019.

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The late-state study was initiated in late-December 2016, with 220 pediatric patients as study universe. It evaluated non-inferiority of weekly hGH -CTP versus Genotropin daily rhGH on 12-month height velocity primary endpoint.

The analysts noted that the drug will be administered using the same pen delivery device Pfizer intends to commercialize.

Additional Indication

The analysts also expect an update on Opko's potential BLA filing for adult hGH based on the outlier analysis of phase III data by the end of 2017. This, according to the analysts, could accelerate the time-to-market by 14+ months, assuming a fourth quarter 2018 approval.

"We view a BLA filing as the most significant potential near term catalyst for OPK shares," the firm said.

Analyzing the competitive dynamics, the analysts said the only other phase III long-acting hGH program, TransCon GH from Ascendis Pharma A/S (NASDAQ: ASND) is set to complete enrolment in the fourth quarter of 2017.

Ladeburg noted the primary endpoint of both studies is 12-month height velocity.

"Assuming both studies are successful, we expect OPK/PFE to have a competitive advantage based on a more convenient pen injector and Pfizer's strong incumbent position in the GHD market," the firm said.

The firm currently expects hGH -CTP TO achieve end-market sales of $570 million in 2022, with pediatrics accounting for 80 percent, plus, of sales.

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