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Kite selloff a buy opportunity?

May 9, 2017

For a biopharmaceutical company, there may be no worse news than the death of a patient receiving treatment during clinical testing. On Monday, shares of Kite Pharma Inc (NASDAQ: KITE) plummeted more than 12 percent after the company disclosed that a patient with brain cancer died following treatment with Kite’s CAR-T therapy KTE-C19.

Particularly concerning for Kite investors is that the patient experience brain swelling, the same side-effect that derailed a similar treatment being tested by rival Juno Therapeutics Inc (NASDAQ: JUNO).

Despite the horrible headline, Cowen analysts urged investors not to read too much into the death.

“While any death is unfortunate, this patient was very sick and was clearly going to die soon anyway,” the firm wrote.

According to Cowen analyst Eric Schmidt, the death is a non-event and the selloff is a buying opportunity for investors. Cowen points out that only 1 in 300 KTE-C19 patients has had cerebral edema and there is only a 2 percent death rate associated with the treatment.

 

“Relative to the efficacy benefit provided, those are very acceptable numbers. So this won’t impact the drug’s opportunity at all,” Cowen said.

The firm notes that Kite is still expected to be first to market with a treatment for diffuse large B-cell lymphoma later this year, which should be a billion dollar opportunity for the company.

In addition, Cowen doesn’t see competition from Novartis AG (ADR) (NYSE: NVS) as an issue for Kite due to its higher failure rate and lengthy manufacturing process.

Despite the Monday selloff, Kite shares remain up 59.1 percent so far in 2017.

Latest Ratings for KITE

Date Firm Action From To
Mar 2017 Standpoint Research Downgrades Buy Hold
Mar 2017 Stifel Nicolaus Downgrades Buy Hold
Mar 2017 Citigroup Downgrades Buy Neutral

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