Gossamer initiated Neutral at Guggenheim citing challenges for PAH therapy

Gossamer Bio (NASDAQ:GOSS) lost ~6% Wednesday after Guggenheim initiated its coverage with a Neutral rating, citing a challenging commercial outlook for the company's tyrosine kinase inhibitor (TKI) seralutinib targeted at pulmonary arterial hypertension (PAH).

While noting that Merck's (MRK) sotatercept could be a game-changer against the indication, the analyst Vamil Divan expects opportunity for other treatments with novel mechanisms of action.

"We are especially interested in tyrosine kinase inhibitors (TKIs) for PAH, given positive efficacy data from oral imatinib in the IMPRES trial," the analyst wrote, referring to a Phase 3 study run by Novartis (NVS) for a rival PAH candidate.

Divan argues that inhaled TKIs such as seralutinib could "deliver the right balance of efficacy and safety." However, the differences between seralutinib and imatinib could explain why the former underperformed in Gossamer's (GOSS) Phase 2 TORREY study and could only achieve a minor market share in PAH.

The analyst projects a 70% probability of success for seralutinib and expects it to generate ~$550M in peak adjusted annual sales in PAH.

Seeking Alpha contributor, Avisol Capital Partners issued a Sell rating on Gossamer (GOSS) in February, arguing that the company currently has only a Phase 3 PAH trial ahead.