Oncology drugmaker Olema triples in a week after latest Roche data eases sector risks
Shares of Olema Pharmaceuticals, a small-cap maker of cancer drugs, soared almost 200% last week, November 18-24. Investors were reacting to positive news on clinical trials from Swiss pharma giant Roche. Olema is advancing a therapy with a similar mechanism of action, meaning Roche’s success has reduced the perceived risks of investing in Olema, Freedom Broker explains. Against this backdrop, at least two Wall Street analysts have raised their target price on Olema shares.
Details
Olema’s shares rose 194% over the last five trading days to reach $25.05 apiece at the close yesterday, November 24. This marked an almost four-year high close.
The trigger was not an Olema announcement, but news from its peer, Roche, Freedom Broker wrote in a note on the small-cap sector (seen by Oninvest). On November 18, the pharma giant said its breast cancer drug delivered “unprecedented results” in the final stage of clinical trials, which could make it a new standard of therapy.
This has lowered the risk profile for Olema, Freedom argues. Both companies are pursuing therapeutics with a similar mechanism of action, and Roche’s results represent the first confirmation of the approach in a late-stage study, analysts explain.
“As risks have been reassessed, the market focus has shifted from ‘does the technology work’ to whose technology will prove more effective,” Freedom wrote. Olema is in an earlier stage of development, but the market has interpreted some of its data so far as reflective of a potential competitive advantage.
Olema moved quickly to take advantage of the rally. On November 19, it announced a public sale of 10 million common shares to raise $190 million. Strong demand lifted the final total to $218.5 million, providing the company with funding for its next clinical stages, Freedom points out.
Stock performance
At least two Wall Street houses have raised their target price on Olema during the rally, according to Yahoo Finance data: JPMorgan raised its target price by 10% to $32 per share, 28% above the November 24 closing price; and Goldman Sachs lifted its target price by 44.4% to $26 per share, for upside of just 4%.
Olema shares have nine “buy” ratings from Wall Street analysts versus no “sell” ratings, MarketWatch data shows. Three months ago, there were seven recommendations, all of them “buy.” The consensus target price is $36.50 per share, for upside of 46%.
