Analysts lay into AB Science after regulatory misstep

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Paris, France, where AB Science is based

Analysts have torn into AB Science over the clinical trial compliance failings identified by regulators in France. Oddo took the most extreme action by slashing its price target from €48 ($53) to €5, but even analysts with rosier assessments of AB’s situation fired off salvos at its management.

The reappraisals of the prospects of AB follow the publication of a decision by French regulators to suspend studies of masitinib, the drug the biotech has spent years trying to bring to market in an unusually large number of indications. AB has said the regulatory failings predate the clinical trial it hopes to use to win approval of masitinib in amyotrophic lateral sclerosis (ALS). But analysts have nonetheless interpreted the regulatory situation as a blow to the French biotech.

How big a blow the news represents is a matter of considerable disagreement. Analysts at Oddo fired first and hardest, slashing their price target for AB from €48 to €5 shortly after news of the situation emerged. The bearish reading of the situation is underpinned by a belief AB will face ongoing suspicion at a time when it needs to convince people of its credibility. AB’s scattergun approach to R&D and two regulatory rejections for masitinib have affected its reputation.

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Other analysts delivered more measured readings of AB’s prospects but the same questions about management reverberate through these assessments. Portzamparc initially suspended its advice on AB but began the week by reinstating its buy recommendation. The stance is underpinned by a belief AB will be out from under the problem in a few months. But with Portzamparc pinning the blame for the situation at the door of AB’s management, it has also slashed its price target by 24%.

The cut partly reflects doubts about the ability of AB’s management to guide it through the current difficulties and the other uncertainties raised by the regulatory holdup. Analysts at Kepler took a different approach to these uncertainties. Faced with unanswerable questions about the fallout from the regulatory criticisms, Kepler has suspended coverage of the company.

Trading in AB has been suspended throughout what otherwise would have been a turbulent two days for the stock. The stock is due to resume trading early this week. That sets AB up for a critical week, with the presentation of data on masitinib in ALS on Thursday potentially reducing or adding to any losses it suffers as a result of the regulatory setback.

AB said the ALS trial met its primary endpoint but is yet to present a full look at the data. Given the aforementioned doubts about the credibility of AB, data released this week will be scrutinized.

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