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On Tuesday, Goldman Sachs initiated coverage of CG Oncology, listed on NASDAQ:CGON, with a Neutral rating and a 12-month price target of $42.00. The investment firm sees a 12% downside potential from the current valuation. The focus of the evaluation is on CG Oncology's oncolytic virus, cretostimogene, which is being developed to potentially transform the treatment landscape for non-muscle invasive bladder cancer (NMIBC).
Cretostimogene is especially targeted at high-risk, Bacillus Calmette-Guerin (BCG) unresponsive, high-risk, BCG-exposed, and intermediate-risk NMIBC patients. The virus has shown promising clinical data in multiple studies, especially in high-risk patients who do not respond to BCG. This includes recent interim results from the pivotal Phase 3 study BOND-003.
Goldman Sachs expects top-line 12-month efficacy data from the BOND-003 study to arrive in late 2024, company management says. These data are expected to have implications for other patient groups, such as high-risk BCG-exposed patients, whose trial initiation is planned for the second half of 2024, and intermediate-risk recurrent patients, whose full enrollment is planned for the second half of 2024. 2026.
The investment firm's assessment of the cretostimogene market opportunity at NMIBC suggests a clear path for CG Oncology to reach peak unadjusted sales of $2.4 billion. These projections are based on a probability of success (PoS) of 75% in high-risk patients who do not respond to BCG, 50% in high-risk patients exposed to BCG, and 50% in recurrent intermediate-risk patients.
Despite cretostimogen's potential, Goldman Sachs believes the company's current valuation adequately reflects these opportunities. This assessment supports its neutral stance on the stock, suggesting that the market has already priced in the potential benefits of the drug's development and expected market penetration.
InvestingPro Insights
Investors following CG Oncology (NASDAQ:CGON) have seen some intriguing moves in the stock's valuation and performance metrics. According to data from InvestingPro, CGON has recently shown significant performance, with a 28.95% Total price return over the last month. This lines up with the stock trading near its 52-week high, in 95.42% of this reference point. These figures suggest strong bullish sentiment among investors, which may be a reflection of optimism around the company's clinical advancements.
However, it is important to note that CGON has not been profitable over the last twelve months, as evidenced by a negative P/E ratio of -55.03 for the same period. Additionally, the company struggles with weak gross profit margins, reporting a gross profit margin of -18370.44%. These financial health indicators present a contrasting picture with recent price appreciation, highlighting the speculative nature of the current investment climate surrounding CGON.
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