On Tuesday, Goldman Sachs (NYSE:GS) initiated coverage on CG Oncology, trading on NASDAQ:CGON, with a Neutral rating and a 12-month price target of $42.00. The investment firm sees a 12% downside potential from the current valuation. The focus of the evaluation is on CG Oncology’s oncolytic virus, cretostimogene, which is being developed to potentially transform the treatment landscape for non-muscle invasive bladder cancer (NMIBC).
Cretostimogene is particularly aimed at high-risk, Bacillus Calmette-Guerin (BCG)-unresponsive, high-risk, BCG-exposed, and intermediate-risk NMIBC patients. The virus has exhibited promising clinical data in multiple studies, especially in high-risk, BCG-unresponsive patients. This includes recent interim results from the pivotal Phase 3 BOND-003 study.
Goldman Sachs anticipates topline data featuring 12-month efficacy from the BOND-003 study by the end of 2024, as indicated by the company's management. This data is expected to have implications for other patient groups, such as high-risk, BCG-exposed patients, with trial initiation projected for the second half of 2024, and recurrent intermediate-risk patients, with complete enrollment anticipated by the second half of 2026.
The investment firm's assessment of cretostimogene's market opportunity in NMIBC suggests a clear path for CG Oncology to achieve unadjusted peak sales of $2.4 billion. These projections are based on a probability of success (PoS) of 75% in high-risk, BCG-unresponsive patients, 50% in high-risk, BCG-exposed patients, and 50% in recurrent intermediate-risk patients.
Despite the potential of cretostimogene, Goldman Sachs believes that the current company valuation adequately reflects these opportunities. This assessment underpins their Neutral stance on the stock, suggesting that the market has already priced in the prospective benefits of the drug's development and expected market penetration.
InvestingPro Insights
Investors tracking CG Oncology (NASDAQ:CGON) have observed some intriguing movements in the stock's performance and valuation metrics. According to InvestingPro data, CGON has recently shown a significant return, with a 28.95% price total return over the last month. This aligns with the stock trading near its 52-week high, at 95.42% of this benchmark. These figures suggest a strong bullish sentiment among investors, which may be a reflection of optimism surrounding the company's clinical advancements.
However, it's important to note that CGON is not profitable over the last twelve months, as evidenced by a negative P/E ratio of -55.03 for the same period. Additionally, the company struggles with weak gross profit margins, reporting a gross profit margin of -18370.44%. These financial health indicators present a contrasting picture to the recent price appreciation, highlighting the speculative nature of the current investment climate around CGON.
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