BofA lowers PepGen stock target as trial delays and competition weigh on outlook

On Monday, BofA Securities adjusted its outlook on PepGen Inc. (NASDAQ:PEPG) stock, a biotechnology company focused on developing transformative therapies for individuals with neuromuscular diseases. The firm reduced the price target on PepGen shares to $6.00, a decrease from the previous target of $10.00, while maintaining a Neutral rating on the stock.

The revision follows PepGen's announcement regarding modifications to the eligibility criteria for a particular dose cohort in its phase 2 clinical trial, known as CONNECT1-EDO51. This trial is part of the company's efforts to evaluate PGN-EDO51, a potential treatment for Duchenne muscular dystrophy (DMD) patients who may benefit from exon 51 skipping therapy.

According to the discussions with PepGen management, the updated trial criteria are designed to enhance the likelihood of success by enrolling a younger patient population, which is expected to demonstrate more pronounced dystrophin expression. The company also indicated that these adjustments would align their trial more closely with those of clinical competitors, thereby facilitating comparisons between different therapeutic programs.

PepGen has shifted its timeline for releasing data on the 10mg/kg dose, now anticipating a readout by the end of 2025. The previous expectation was for the first quarter of 2025. Despite agreeing with the changes to the trial design, BofA Securities remains cautious regarding PepGen's position within the competitive landscape of exon skipping treatments. This caution is partly due to less favorable results from earlier 5mg/kg dose data released in July.

The firm reiterated its Neutral stance, citing the delayed timelines and the need for more clarity on PepGen's competitive edge in the exon skipping space as the primary reasons for the lowered price objective.

In other recent news, PepGen Inc. has reported significant changes within its corporate governance and executive roles. The biotechnology firm announced the upcoming retirement of Board Director, Christopher Ashton, effective September 30, 2024. Ashton's departure will reduce the board's size from seven to six directors.

In addition to this, PepGen's shareholders have approved an Officer Exculpation Amendment, aligning with changes in Delaware law, and elected two new Class II directors. The company's fiscal year-end independent registered public accounting firm, KPMG LLP, was also ratified by shareholders.

Furthermore, recent developments include executive promotions, with Dr. Michelle Mellion appointed as Chief Medical (TASE:PMCN) Officer and Dr. Hayley Parker as Senior Vice President, Global Regulatory Affairs. PepGen also received orphan drug and rare pediatric disease designations from the U.S. Food and Drug Administration for its investigational drug PGN-EDO51. The company continues to advance its clinical pipeline, with preliminary data from the ongoing CONNECT1 Phase 2 trial expected within the year, and the CONNECT2 Phase 2 trial set to start subsequently.

InvestingPro Insights

Recent data from InvestingPro sheds additional light on PepGen Inc.'s financial situation and market performance, providing context to BofA Securities' cautious outlook. The company's market capitalization stands at $134.29 million, reflecting its current valuation in the biotechnology sector.

InvestingPro Tips highlight that PepGen "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," suggesting a relatively stable financial position in the near term. This could be crucial for the company as it navigates the extended timeline for its clinical trials and faces potential cash burn.

However, the stock has experienced significant volatility recently. InvestingPro data shows a 53.91% price decline over the past month and a 68.69% drop over the last six months. This aligns with the InvestingPro Tip indicating that the "stock has taken a big hit over the last six months." The current stock price of $4.12 is trading at only 21.35% of its 52-week high, further illustrating the recent downward pressure.

It's worth noting that analysts have set a fair value target of $17 for PepGen, significantly higher than its current trading price. This discrepancy between the market price and analyst expectations underscores the uncertainty surrounding the company's prospects and the importance of upcoming clinical trial results.

For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on PepGen, providing a deeper understanding of the company's financial health and market position.

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