On Monday, Citi revised its stance on BioAge Labs Inc (NASDAQ:BIOA) stock, currently trading at $20.09 with a market capitalization of $720 million, downgrading it from Buy to Neutral and slashing the price target to $7 from $45. According to InvestingPro analysis, the stock appears overvalued at current levels.
The adjustment follows the company's announcement after the market closed on Friday that it would halt the Phase 2 STRIDES trial of its drug azelaprag due to unexpected liver enzyme elevation in participants. This trial was assessing azelaprag as both a standalone treatment and in combination with tirzepatide in older obese adults.
The unexpected liver toxicity signal has raised concerns over azelaprag's future in obesity treatment, prompting the company to discontinue the STRIDES trial. BioAge Labs has indicated it will provide further updates on the program in the first quarter of 2025.
Despite these challenges, InvestingPro data shows the company maintains a strong financial health score of 3.19 (rated as "GREAT"), with a robust current ratio of 17.63 and more cash than debt on its balance sheet. The cessation of the trial has been identified as a significant setback for the company's stock, as it was considered a major potential catalyst.
Citi's current evaluation reflects a cautious outlook on BioAge Labs' near-term prospects, citing the liver toxicity issue as a limiting factor for azelaprag's advancement. The revised price target of $7 reflects this new assessment, with the firm now considering the stock as Neutral/High Risk.
Despite the recent developments, Citi has pointed out several potential positive factors for BioAge Labs. The company's NLRP3 program, which is expected to submit an Investigational New Drug application in the second half of 2025, the possibility of advancing backup apelin receptor agonists, its proprietary discovery platform, and a cash runway extending beyond 2029 are all elements that could provide longer-term support for the company's shares.
The stock has shown resilience with a 15% gain over the past week, though InvestingPro subscribers can access additional insights, including 6 more ProTips and detailed financial metrics to better evaluate the company's prospects.
In other recent news, BioAge Labs has been the subject of significant analyst attention, with major financial institutions revising their outlooks on the company. Jefferies recently downgraded BioAge Labs stock from Buy to Hold, following the company's decision to halt the STRIDES Phase 2 study of Aze/tirze in obesity due to safety concerns. Despite this, the company maintains strong financial health, with robust liquidity metrics.
On the other hand, Citi initiated coverage on BioAge Labs with a Buy rating, highlighting the potential of the company's leading drug candidate, azelaprag, currently in a Phase 2 clinical trial for obesity treatment. Similarly, Jefferies and Morgan Stanley (NYSE:MS) initiated coverage with a Buy and an Overweight rating, respectively, citing the potential of azelaprag to generate significant revenue and BioAge's promising early data on weight loss and body composition improvements.
All three firms noted the company's strategic partnership with pharmaceutical titan Eli Lilly (NYSE:LLY) as a crucial part of BioAge's strategy. The interest in the obesity treatment landscape among pharmaceutical companies also leads Citi to consider BioAge Labs as a possible target for mergers and acquisitions, should the drug's proof-of-concept be successful. These recent developments underscore the robust validation of BioAge's research and development efforts.
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