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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 Tuesday, 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 the company to use a properly powered 6MWD measure as the primary endpoint in a future Phase 3 trial.

According to the analysts, 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 its 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.