BofA cuts Rocket Pharmaceuticals target to $32, keeps Buy rating

On Tuesday, BofA Securities adjusted its outlook on Rocket Pharmaceuticals (NASDAQ:RCKT), reducing the price target to $32 from $34, while maintaining a Buy rating on the stock. The adjustment follows Rocket Pharmaceuticals’ first-quarter update and its presentation at the American Society of Gene & Cell Therapy (ASGCT). Analysts at BofA expressed continued optimism about the company’s prospects, particularly in the second half of the year.

Rocket Pharmaceuticals reported a modestly better-than-expected GAAP EPS, surpassing the consensus by $0.02. The company’s financial position appears robust, with $318 million in cash expected to last until the fourth quarter of 2026. InvestingPro analysis shows the company holds more cash than debt on its balance sheet, with a strong current ratio of 9.19, though it’s quickly burning through cash. This funding should be sufficient for Rocket Pharmaceuticals to progress through several significant milestones.

The company has reiterated its plans to update on the pivotal phase 2 trial of RP-A501 for Danon disease by mid-year, with results anticipated by mid-2026. Additionally, the rolling submission of RP-L102’s Biologics License Application (BLA) for Fanconi Anemia is on track for completion by the end of 2025 or early 2026. The European Medicines Agency (EMA) is currently reviewing the application. Meanwhile, the U.S. Food and Drug Administration (FDA) is reviewing updated Chemistry, Manufacturing, and Controls (CMC) for Kresladi, and the company aims to submit the complete BLA in 2025. Rocket Pharmaceuticals is also targeting a mid-year submission for its BAG3 program Investigational New Drug (IND) application.

Despite the near-term catalysts, the sentiment around Rocket Pharmaceuticals has been affected by broader concerns, including changes within the FDA and the departure of several figures historically supportive of gene therapies. Year-to-date, Rocket Pharmaceuticals’ stock has seen a significant decline, dropping 50% compared to the Nasdaq Biotechnology Index’s 5% fall. InvestingPro data reveals the stock has fallen over 70% in the past year, with the current price of $6.27 representing a significant distance from its 52-week high of $26.98.

However, BofA Securities remains positive about the company’s future, highlighting the encouraging clinical efficacy signs from RP-A601’s positive dose-escalation data. With no dose-limiting toxicities (DLTs) and improved clinical outcomes, there is potential for a re-rating as Rocket Pharmaceuticals moves towards commercialization. The firm believes that the stock presents a compelling risk/reward scenario. The updated price objective reflects the latest financial disclosures and an increase in the weighted average cost of capital (WACC) to 18% from 17%, acknowledging the current macro uncertainties. Based on InvestingPro’s Fair Value analysis, the stock appears to be slightly overvalued at current levels, with additional insights available in the comprehensive Pro Research Report covering this $675 million market cap company.

In other recent news, Rocket Pharmaceuticals has faced a significant challenge following a patient death in its Danon disease trial, leading to a clinical hold by the FDA. The trial was paused after the patient experienced capillary leak syndrome, linked to a new immune suppression agent. Despite this setback, BMO Capital Markets, Jefferies, JPMorgan, and Morgan Stanley (NYSE:MS) have maintained their positive ratings on Rocket Pharmaceuticals, with price targets ranging from $29 to $44. Analysts from these firms emphasize the importance of monitoring the company’s cash burn and financial sustainability amid this development.

Rocket Pharmaceuticals reported having $318.2 million in cash, cash equivalents, and investments as of March 31, and anticipates funding operations into 2027. The company is collaborating with the FDA to investigate the cause of the adverse event, which has raised concerns about the safety and future of its RP-A501 gene therapy. The clinical hold has also impacted the timeline for significant milestones, including a webinar update and Phase II dataset release initially scheduled for 2025 and 2026, respectively. Rocket Pharmaceuticals is now focusing on its AAV platform and considering strategic options for its pipeline to optimize value.

The recent developments have resulted in volatility for Rocket Pharmaceuticals’ stock, as investors reassess the situation. The company’s immediate priority is to address the safety concerns and determine the root cause of the serious adverse event. Analysts suggest that the setback could alter the risk/benefit assessment for RP-A501, potentially affecting its approval process. Rocket Pharmaceuticals has yet to provide a revised timeline for the continuation of the trial or the release of updated data.

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