William Blair initiated coverage on Elevation Oncology, Inc. (NASDAQ:ELEV), a cancer drug focus firm leveraging antibody-drug conjugate expertise initially targeting two clinically validated targets in oncology, Claudin 18.2 and HER3.
Analyst Andy Hsieh writes that investing in Elevation Oncology offers a favorable risk-to-reward ratio, especially at its current valuation. He has initiated coverage with an Outperform rating.
The company provides exposure to the fast-growing market of antibody-drug conjugates and focuses on a scientifically and regulatory-validated target. The ADC field has gained significant interest, with claudin 18.2 emerging as a promising target.
This protein is typically hidden in healthy tissues but becomes accessible and overexpressed in many cancers, making it an ideal therapeutic focus.
Elevation's lead program, EO-3021, aligns with these trends and has shown promising results in early Phase I trials. Additionally, the recent approval of Astellas Pharma Inc's (OTC:ALPMF) (OTC:ALPMY) Vyloy, a CLDN18.2-targeted antibody, reduces clinical and regulatory risks for Elevation's program, offering high potential rewards for a modest initial investment.
In August, Elevation Oncology reported initial data from the dose escalation portion of the ongoing Phase 1 trial of EO-3021.
As of the data cutoff date of June 10, 32 patients had been treated. EO-3021 was observed to be generally well-tolerated. No Grade 4 or 5 treatment-related adverse events were reported, and less than 10% of patients discontinued EO-3021 due to adverse events.
Hsieh estimates the total addressable market for frontline CLDN18.2-positive gastric and GEJ cancer in five major regions at about $6.6 billion, with $1.8 billion in the U.S. alone.
For second-line pancreatic cancer, which has limited treatment options, the TAM is projected at $1.8 billion across the U.S. and Europe, including $1.3 billion in the U.S. The analysts believe even a small market share in these areas could significantly boost the company's current valuation.
Recently, Elevation Oncology nominated EO-1022 as its HER3 ADC development candidate. EO-1022 is progressing through preclinical development, and Elevation Oncology expects to file an investigational new drug application in 2026.
Price Action: ELEV stock is up 7.54% at $0.64 at last check Friday.
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