Biotech PepGen nearly doubles on trial results. Wall Street sees a lot more upside.

Shares of biotech PepGen surged 93% on Tuesday after the company reported strong midstage trial results for its experimental treatment for a muscle-wasting disorder. PepGen competes in that area with pharma giant Novartis, whose own treatment failed in a clinical trial. Wall Street sees more than 175% further upside for PepGen.

PepGen shares rose 93% on the Nasdaq on Tuesday to close at $4.61 apiece, their highest level since late March. The market was reacting to strong phase II results for PGN-EDODM1, which PepGen tested in patients with myotonic dystrophy type 1. The inherited disorder makes it difficult for muscles to relax after contracting and causes them to weaken and waste away over time.

Mean splicing correction in muscle reached 46.5% among patients who received the experimental drug, the highest level ever reported in a multiple-dose study for the disorder, PepGen stated in its press release.

The finding suggests the drug can reverse the underlying molecular damage in muscle cells, Barron’s explains. By freeing regulatory proteins trapped by toxic RNA, the drug allows patients’ cells to resume producing healthy adult muscle proteins in place of defective ones. Mean splicing correction in the placebo group was 6.8%.

PepGen also reported improvements in grip strength, performance on a 10-meter walk/run test, and hand opening time.

Several companies are developing treatments for myotonic dystrophy type 1. Dyne Therapeutics is testing its drug in a phase III trial. In September, Novartis’s treatment for the same disorder missed its primary endpoint in a phase III trial.

Mean splicing correction with PGN-EDODM1 exceeded the levels reported for both rivals’ drugs, Leerink Partners analyst Joseph Schwartz wrote in a note cited by BioPharma Dive. The result also topped the 30% threshold H.C. Wainwright analyst Ananda Ghosh was looking for, Barron’s reports.

Schwartz sees best-in-class potential for PepGen’s drug, though he cautioned that “cross-trial comparisons remain imperfect.” Oppenheimer analyst Kostas Biliouris said the results represent a “best-case scenario” for the biotech.

Wall Street is broadly upbeat on the stock, with seven “buy” calls versus a single “hold,” according to MarketWatch data. The average target price of $12.75 per share implies around 177% upside from the last close.