Positive Analyst Ratings Not Enough to Drive Myovant Sciences Higher

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Myovant Sciences Ltd. (NYSE: MYOV) priced its initial public offering of 14.5 million common shares on October 27, 2016. Now its quiet period has come to an end and the analysts at firms in the underwriting syndicate are free to make their research calls.

The company sold shares at $15.00 each. This was at the top of the range of $12.00 to $15.00 per common share just a day before it priced, even though it was originally slated to sell only 13 million shares. All of the common shares were offered by Myovant.

Myovant Sciences is a biotech focused on the development of novel therapies for women’s health and endocrine diseases. The company was launched in February 2016 by Roivant Sciences and Takeda. It is formally based in Hamilton, Bermuda, but its operations are in San Francisco, California.

Citigroup, Cowen & Co., Evercore Group, and Barclays were listed as Myovant’s joint book-running managers. JMP Securities was lead manager and Robert W. Baird & Co. was co-manager for the offering.

What investors may take note of ahead of the research calls was that Myovant was the worst-performing recent IPO. Myovant dropped on its first day as the stock closed on October 27 at $13.26–only to fall the next four trading days to an $11.04 closing bell price on November 2 before recovering. Myovant closed $11.25 on Friday, a drop of 25% from the formal $15.00 per share pricing.

Here are the analyst calls that have been made so far:

  • Barclays started it as Overweight and with an $18.00 price target.
  • Citigroup started coverage as Buy with a $17.00 price target.
  • Cowen & Co. started coverage as Outperform, but with no price target yet.
  • JMP Securities started coverage with a Market Outperform rating and a $23.00 price target.
  • Robert W. Baird & Co. started coverage with an Outperform rating and a $20.00 price target.

As JMP Securities had the highest price target, investors might want to see why they are so optimistic. They call it a high-quality de-risked asset with blockbuster drug potentials. The firm’s report said:

Myovant was founded in February 2016 with the aim of becoming a leader in therapeutics for women’s health and endocrine diseases. The lead asset, relugolix, is a potent oral GnRH antagonist entering Phase 3 development in women with uterine fibroids (UF) and endometriosis (EM), and in men with advanced prostate cancer (aPC). We view this as a substantially de-risked asset with established mechanistic rationale and compelling Phase 2 results in Japan. We believe there are blockbuster sales opportunities in these indications as we expect oral GnRH antagonists to become standard-of-care therapies, supplanting injectable GnRH agonists and driving market expansion. Our $23 target is based on a risk-adjusted, NPV analysis of U.S. relugolix sales in EM, UF, and aPC, with potential upside from ex-U.S. sales and RVT-602.

All of the ratings seen so far were very positive, but Myovant shares were not up, even while the S&P 500 hit an all-time high on Monday. Myovant shares were last seen down 3.5% at $10.86, with only 66,000 trading right before noon. Myovant’s post-IPO trading range has been $10.25 to $15.50, and its market cap is almost $640 million.