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On Monday, Canaccord Genuity adjusted its outlook on BioXcel Therapeutics (NASDAQ:BTAI) shares, reducing the price target to $5 from the previous $7 while maintaining a Buy rating on the stock. Currently trading at $0.41, BTAI has shown resilience with a 12.84% gain over the past week, despite falling 85% over the last year.
The adjustment follows recent financial developments at the company, including a capital raise and the renegotiation of financial covenants. According to InvestingPro analysis, the company's overall financial health score stands at 1.57, indicating significant challenges ahead.
The company has successfully renegotiated certain financial covenants and believes it now has sufficient cash to operate into the first quarter of 2025. With a substantial debt burden of $104.97 million and a current ratio of 1.87, the company's financial position remains challenging.
The revised agreements stipulate that additional funds will be raised over the course of 2025. Canaccord Genuity's analyst incorporated these updates into their financial model, which now reflects the latest capital raises and liquidity projections.
The analyst also revised assumptions regarding the net price of BXCL501, BioXcel Therapeutics' product for at-home use. The price assumption for BXCL501 has been increased to $125 per film, up from $100, with an annual growth rate of 2.5%. This price is still considered conservative compared to the potential pricing for at-home use, as reimbursement dynamics differ from institutional settings.
The probabilities of approval for BXCL501 as an acute treatment for agitation in schizophrenia/bipolar disorder and Alzheimer's disease (AD) remain unchanged at 85% and 40%, respectively. Canaccord Genuity is closely monitoring the company's management actions for any additional measures that might provide further financial flexibility.
The updated analysis also includes a shift in the discounted cash flow (DCF) period, extending it from mid-2025 to the end of 2025. These changes collectively have led to the revised DCF-based price target of $5 for BioXcel Therapeutics shares. InvestingPro subscribers have access to 11 additional key insights about BTAI, including detailed valuation metrics and growth forecasts, helping investors make more informed decisions in this volatile biotech stock.
In other recent news, BioXcel Therapeutics has made significant modifications to its credit agreement, including issuing new warrants to lenders and adjusting its capital raising requirements. The company now needs to secure a series of funds by specific dates tied to the SERENITY At-Home Phase 3 trial results, with the first amount of $7 million due by November 27, 2024.
Furthermore, the company has agreed to a fixed interest rate of 13% per annum on its loans and has committed to appointing a new independent board director to explore strategic options.
BioXcel Therapeutics also reported a decrease in its net revenue for Q3 2024 to $214,000, although its nine-month revenue showed an overall increase, reaching $1.9 million. The company's net loss was significantly reduced to $13.7 million from $50.5 million in Q3 2023. These financial results led Mizuho (NYSE:MFG) Securities to maintain its Neutral rating on BioXcel, citing low sales of the drug Igalmi and higher operating expenses.
Simultaneously, BioXcel is actively advancing its clinical trials, including the initiation of two pivotal Phase 3 trials for drug candidate BXCL501. The company has also launched the Phase 3 SERENITY At-Home study for Igalmi, with top-line data expected by the third quarter of 2025.
These are recent developments shaping BioXcel's trajectory as the company explores strategic financing options and discusses potential partnerships to address its immediate liquidity challenges and support its ongoing clinical trials.
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