On Tuesday, Morgan Stanley (NYSE:MS) downgraded shares of BioAge Labs Inc (NASDAQ:BIOA) from Equalweight to Underweight, significantly reducing the price target to $5 from the previous $40. The downgrade comes as the stock has plummeted 73% in the past week, now trading at $4.65, just cents above its 52-week low of $4.50.
According to InvestingPro data, the stock's RSI indicates oversold conditions, suggesting potential for a technical bounce. This adjustment follows the recent discontinuation of a key study by the company.
BioAge Labs halted its Phase 2 STRIDES study for the combination of azelaprag and tirzepatide in treating obesity due to elevated transaminase levels, which are indicative of potential liver issues, observed in some participants. The study's issues were specifically linked to the azelaprag treatment groups, with no such cases reported in the groups receiving only tirzepatide.
The future of azelaprag remains uncertain until BioAge Labs provides an update, expected in the first quarter of 2025. The company's focus for the upcoming year will be on preclinical data and the development of an oral NLRP3 inhibitor targeting neuroinflammation, with more details to be revealed in the first half of 2025 and an Investigational New Drug (IND) submission planned for the second half of the year.
Morgan Stanley highlighted that while interest in BioAge Labs might pivot to the NLRP3 program, any initial clinical data from this program is not anticipated until 2026. With this timeline in mind and considering the absence of significant clinical milestones in the near future, the firm has revised its outlook for the company's stock.
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The firm also established a base case range for BioAge Labs' stock valuation between $2 and $8, with a price target of $5, citing that there are more attractive investment opportunities within its coverage area compared to BioAge Labs at this time. This target falls below the broader analyst range of $7 to $45, with the current consensus maintaining a neutral stance on the stock.
In other recent news, BioAge Labs has experienced significant changes in its stock ratings following the discontinuation of its Phase 2 STRIDES trial. This trial was assessing the drug azelaprag as a treatment for obesity, but was halted due to unexpected liver enzyme elevation in participants.
Analysts from Citi and Jefferies have subsequently downgraded their ratings of BioAge Labs' stock from Buy to Neutral and Buy to Hold respectively, citing concerns over azelaprag's future in obesity treatment.
Despite these developments, BioAge Labs maintains a strong financial health score, with a robust current ratio and more cash than debt on its balance sheet. Furthermore, the company's NLRP3 program and the potential advancement of backup apelin receptor agonists are viewed as positive factors for the company's long-term prospects.
Previously, Citi had initiated coverage on BioAge Labs with a Buy rating, highlighting the potential of azelaprag in obesity treatment. Similarly, Jefferies and Morgan Stanley had also initiated coverage with a Buy and an Overweight rating respectively, citing the potential of azelaprag to generate significant revenue. All three firms noted the company's strategic partnership with pharmaceutical titan Eli Lilly (NYSE:LLY) as a crucial part of BioAge's strategy.
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