Contineum drops 25% on mixed Bristol Myers IPF data; Stifel keeps Buy rating

Investing.com -- Contineum Therapeutics (NASDAQ:CTNM) shares reversed course and fell 25% in Monday trading, erasing an initial 27% pre-market surge following Bristol Myers Squibb's (BMY) announcement that its Phase 3 ALOFT-IPF trial evaluating admilparant in adults with idiopathic pulmonary fibrosis (IPF) met its primary endpoint.

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Contineum's lead asset, PIPE-791, targets the same biological pathway as Bristol Myers' admilparant. Both PIPE-791 and admilparant are LPA1 antagonists being developed for IPF, with PIPE-791 currently in a Phase 2 trial. While Bristol Myers' Phase 3 success at the 60 mg dose represents the first large-scale confirmation that LPA1 antagonists work in IPF, the 120 mg dose failed to reach statistical significance, creating some lingering questions about dose-response in the broader LPA1 class.

Despite the market sell-off, Stifel analyst Paul Matteis previously identified the Bristol Myers trial outcome as a key factor for Contineum's valuation and issued a strong defense of the company following the readout.

"We're reiterating our Buy rating on CTNM following the success of BMY's LPA1R antagonist in their IPF ph3," Matteis wrote. "Notably, the 60mg BID dose demonstrated stat-sig reduction in FVC vs pbo at 52wks, but the 120mg arm missed on stats (though did show disease slowing). Although details were light in the PR, overall safety was described as favorable with a low rate of discontinuations due to AEs for both doses."

Matteis emphasized that the readout is ultimately a net positive for Contineum's underlying science. "As it relates to CTNM, this data provides another piece of clinical validation for the LPA1 mechanism in IPF, and while the one nuance and lingering question here is the dose-response, we expect shares to rise given the stock is currently trading at a <$400MM EV and this could be a very big class in IPF."

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Key Takeaways from Stifel's Note:

• BMY's success provides a major proof-of-concept for the LPA1 antagonist mechanism. "Big picture though—even if the data aren't perfect, we now have 4 studies for BMY across two compounds which have shown efficacy (3 IPF, 1 PPF), and for CTNM, even modeling a conservative POS for PIPE-791 implies meaningful upside to the stock."

• Safety looked favorable across both of BMY's dose arms, with discontinuation rates similar to placebo. This eases some fears following a recently shared protocol amendment involving a fatal safety event in the admilparant trial. Matteis noted this affirms confidence in the safety of the mechanism, adding that "CTNM is dosing meaningfully lower than BMY (10mg/day or less) regardless."

• BMY succeeding on the 60mg dose but missing on the 120mg dose is an "odd nuance" that skeptics may point to, but Stifel suggests this could be attributed to patient heterogeneity in IPF and standard trial execution challenges (noting that the blockbuster drug Esbriet also failed one of its two studies).

• CTNM's molecule is thought to be more potent and utilizes once-daily (QD) dosing, whereas Bristol Myers' admilparant requires twice-daily (BID) dosing. Even if CTNM doesn't attain vastly superior efficacy, "CTNM could still have a very large drug in their hands if successful... overall the market opportunity in IPF is very significant with mediocre products generating billions in revenues."