Goldman Sachs: Odonate Therapeutics Has Potential, But There's Greater Upside Elsewhere

Odonate Therapeutics Inc (NASDAQ: ODT) is a late-stage biopharmaceutical company focused on the treatment of HER2-/HR+ metastatic breast cancer. Most recently, the company began a Phase 3 study of its tesetaxel therapy Contessa.

The Analyst

Goldman Sachs' Dana Flanders initiated coverage of Odonate's stock with a Neutral rating and $27 price target.

The Thesis

An unmet need exists for improving quality of life for metatastic breast cancer patients and Odonate's tesetaxel successfully showed a differentiated profile in prior Phase 2 studies relative to on-market IV taxanes, Flanders said. (See the analyst's track record here.) 

With an eventual launch of tesetaxel in the U.S. in 2021, followed by a launch in the EU region in 2022 and a 2023 Japanese launch, Odonate could see peak worldwide sales of $1.2 billion, according to Goldman Sachs. 

But Odonate's stock isn't necessarily a buy, and investors may find better value elsewhere, the analyst said. Specifically, Goldman's $27 price target is based on a discounted cash flow model that assumes a 13-percent weighted average cost of capital, a 5-percent terminal growth rate, a ramp in margins in the low 60-percent range and a 20-percent tax rate.

The stock's 8-percent upside potential implies that there is "greater relative upside elsewhere" within Goldman Sach's coverage universe, Flanders said. 

Price Action

Shares of Odonate Therapeutics were down 2.24 percent at $24.44 at the time of publication Tuesday.

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