Wedbush Bets On Magenta Therapeutics, Projects Rewards If Stem Cell Technology Successful

Magenta Therapeutics Inc (NASDAQ: MGTA), which made an initial public offering last month, is operating in an area largely overlooked by drug developers, according to Wedbush.

The Analyst

Analyst David Nierengarten initiated coverage of Magenta with an Outperform rating and $22 price target. 

The Thesis

Magenta's programs are designed to expand the use of the hematopoietic stem cell transplant, or HSTC, process into a broader group of patients and improve outcomes, Nierengarten said in a Monday note. (See the analyst's track record here.) 

HSTC has the potential to cure malignant, genetic and autoimmune disorders, but the process is fraught with risks due to potential complications or the lack of a suitable donor, the analyst said. 

If Magenta's products improve outcomes and speed patient discharge, the analyst said high reimbursement from payors and rapid adoption by providers is likely.

"By improving the risk-reward of transplant, we also expect increased utilization in not only patients with hematologic malignancies but also in patients with genetic diseases and autoimmune disorders," Nierengarten said. 

Magenta's most advanced program is MGTA-456, an ex vivo expanded umbilical blood cord graft that could become a preferred option for allogenic transplant, according to Wedbush. 

The molecule is currently in a Phase 2 study and could arrive to market with a broad label in the 2022-2023 timeframe, Nierengarten said. 

The analyst named the following as coming catalysts that could draw attention to the stock: 

• Initial data from the ongoing Phase 2 study of MGTA-456 before the end of 2018. 
• Updates on three preclinical programs in conditioning, stem cell mobilization and GvHD prevention before the end of 2018.
• MGTA-145 entering clinical trials in 2019. 
• MGTA-456 entering Phase 3 studies in 2019. 

The Price Action

Magenta shares are down about 8 percent since June 21 listing. 

The stock was sliding more than 7 percent to $12.41 at the time of publication Monday. 

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