H.C. Wainwright Starts Ocera Therapeutics (OCRX) at Buy, $10 PT

H.C. Wainwright initiates coverage on Ocera Therapeutics (NASDAQ: OCRX) with a Buy rating and a price target of $10.00, calling it a unique microcap play on liver cirrhosis with substantial orphan disease potential.

Analyst Ed Arce commented, "The primary complication of liver cirrhosis is hepatic encephalopathy (HE; mental confusion), prevalent in most patients with decompensated cirrhosis, a condition with no approved treatment options that can progress to coma and death. We believe Ocera's lead drug, OCR-002, has the potential to become the gold standard for both the treatment and prevention of overt HE. OCR-002 directly treats the underlying cause of HE by acting as an ammonia scavenger (the most physiologically sound approach) to rid the body of toxic hyperammonemia (too much ammonia in the blood), rapidly correcting the decline in consciousness and mental awareness, characteristic of an acute episode of HE. In a prior Phase 2 study in cirrhotics, OCR-002 was shown to be safe and well tolerated (and much more so than the current front-line, lactulose, a laxative). Critically, we believe that Ravicti (an earlier ammonia scavenger), approved for urea cycle disorders, provides clear validation of OCR-002's mechanism of action. Furthermore, whereas Ravicti works only via the liver, OCR-002 also removes ammonia from muscle tissue as well, offering not only a more complete (and likely more efficacious) mechanism, but also one appropriate in patients with hepatic insufficiency. Our positive thesis on OCRX rests on three key features of OCR-002: 1) the only ammonia scavenger available, or in development, for treating HE; 2) positive efficacy in key STOP-HE trial is substantially de-risked, due to prior Ravicti data, representing a highly favorable risk-reward ratio, in our view; and 3) availability in both IV (for acute episodes) and oral (chronic maintenance of remission) formulations. We view the Phase 2b data readout of the STOP-HE study, expected in 1Q17, as a likely substantial stock catalyst. We project commercial launch in the U.S. in late 2020 and model peak year 2028 sales of IV of ~$600M (50% market penetration) and ~$636M for the oral formulation (40% market penetration)."

For an analyst ratings summary and ratings history on Ocera Therapeutics click here. For more ratings news on Ocera Therapeutics click here.

Shares of Ocera Therapeutics closed at $2.20 yesterday.

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