Baird cuts Leap Therapeutics stock rating, slashes target

On Wednesday, Baird analyst Joel Beatty revised the rating on Leap Therapeutics (NASDAQ:LPTX) stock, moving from Outperform to Neutral. This adjustment comes alongside a significant reduction in the price target, now set at $1.25, a steep decline from the previous $9.00. The downgrade follows a dramatic 71.74% decline in share price over the past week, with the stock now trading at $0.65, near its 52-week low. According to InvestingPro data, three additional analysts maintain coverage of the stock, with consensus targets ranging from $5.47 to $15.00. The reassessment by Baird was prompted by Leap Therapeutics’ recent announcement of phase 2 trial results for its cancer drug, sirexatamab, which is being tested in colorectal and gastric cancer treatments.

Beatty’s analysis pointed to the response rate data from the trials, acknowledging that sirexatamab demonstrates some efficacy in cancers with high Dickkopf-1 (DKK1) expression. Despite this, the analyst expressed concerns over the ambiguous survival data that has emerged thus far. The lack of conclusive results, coupled with a deteriorating financial outlook for Leap Therapeutics following the market’s reaction to the news, has led to Baird’s more cautious stance on the company’s prospects.

The trials in question aimed to evaluate the therapeutic potential of sirexatamab, but the mixed outcomes have raised doubts about the drug’s path to market viability. Beatty’s statement underscores the complexity of interpreting the clinical data and the challenges it poses for the company’s strategic direction. InvestingPro analysis reveals the company’s financial health score stands at 1.81 (Fair), with a concerning cash burn rate. Despite these challenges, the company maintains a strong current ratio of 3.97, indicating sufficient liquidity to meet near-term obligations.

Leap Therapeutics’ stock experienced a downturn in response to the trial results and Baird’s subsequent downgrade, reflecting the market’s revised expectations for the company’s future performance. The revised price target of $1.25 by Baird represents a recalibration of the stock’s valuation in light of these recent developments.

The downgrade to a Neutral rating signifies a shift in Baird’s recommendation, suggesting that investors may want to hold off on further investment in Leap Therapeutics until more definitive trial results or company strategies are revealed. The new rating and price target are based on the latest available information and analysis of the company’s clinical trial outcomes and financial position. With a market capitalization of just $24.87 million and significant volatility in its stock price, investors seeking deeper insights can access 16 additional ProTips and comprehensive financial metrics through InvestingPro.

In other recent news, Leap Therapeutics reported mixed results from its various studies. The company announced the discontinuation of its DisTinGuish study on advanced gastric cancer, as the study did not meet the primary progression-free survival endpoints. The decision to halt plans for Phase 3 studies in this area was made despite some activity in biomarker populations. Instead, Leap Therapeutics will redirect its efforts towards the development of sirexatamab in colorectal cancer and seek strategic partnerships for its development in gastric cancer and other DKK1-high indications.

On a positive note, Leap Therapeutics shared initial data from its DeFianCe study, which showed promising results for the treatment of advanced colorectal cancer. The study demonstrated a higher objective response rate with its drug sirexatamab when used in combination with bevacizumab and chemotherapy. These findings have led the company to prepare for a registrational Phase 3 study in second-line colorectal cancer patients.

These developments are recent and show a shift in the company’s focus from gastric cancer to colorectal cancer. The company’s strategic shift and the pursuit of partnerships indicate a recalibration of its development priorities in light of the recent study outcomes.

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