Cargo Therapeutics stock rating cut by Jefferies to Hold

Thursday, Jefferies analysts downgraded Cargo Therapeutics (NASDAQ:CRGX) shares from Buy to Hold, significantly reducing the price target to $3.00 from the previous $32.00. The stock, currently trading at $13.19, has seen a dramatic 42% decline over the past year. According to InvestingPro analysis, the company maintains a Fair financial health rating, though its price momentum score signals caution. The downgrade follows the company’s announcement that it would discontinue its Phase II Firi-cel (CD22 CART) program due to concerns over safety and durability. This decision marks a major shift for the biotechnology firm, which is now considered to be at a much earlier stage in development.

The discontinued program has led to a reassessment of the company’s prospects, as the next-generation tri-specific CAR-T therapy, CRG-023, is not expected to enter Phase I trials until the second quarter of 2025, with data anticipated in 2026. InvestingPro data reveals that analysts have revised their earnings expectations downward, with the company expected to remain unprofitable this year. In light of these developments, Jefferies has adjusted its outlook on the stock, suggesting that Cargo Therapeutics may trade below its cash value.

Jefferies provided further details on the company’s financial position, estimating that Cargo Therapeutics has approximately $325 million in cash as of the first quarter of 2025, equating to around $7 per share. However, the firm projects that by the end of 2026, the cash balance could dwindle to less than $200 million, or $3 to $4 per share, even as the company plans to slash operating expenses by 50% or more. While InvestingPro data shows the company holds more cash than debt and maintains a strong current ratio of 18.95, it’s rapidly burning through its cash reserves. Subscribers can access 8 additional ProTips about CRGX’s financial health and future prospects. Management has indicated that these measures should extend the company’s financial runway through 2028.

The unexpected halt of the Firi-cel program and the subsequent downgrade highlight the volatile nature of the biotech industry, where clinical trial outcomes can significantly alter a company’s trajectory. Cargo Therapeutics now faces the challenge of advancing its early-stage pipeline while managing its financial resources efficiently.

In other recent news, Cargo Therapeutics has faced significant developments. Following safety concerns and an unfavorable benefit/risk profile, the company discontinued its Phase 2 FIRCE-1 clinical trial for firi-cel, a treatment previously under development for large B-cell lymphoma. This decision prompted both Piper Sandler and Chardan Capital Markets to downgrade Cargo Therapeutics’ stock rating to neutral.

Notwithstanding, Clear Street initiated coverage on the company with a Buy rating and a $28 target, largely due to the potential of another drug candidate, Firi-cel. Cargo Therapeutics also secured approximately $110 million from a private investment for further development of its CRG-023 therapy. Despite the setback with firi-cel, the company plans to continue with the development of other treatments in its pipeline, including CRG-023.

In response to the discontinuation of the FIRCE-1 trial, Cargo Therapeutics is reducing its workforce by approximately 50% to conserve cash. The company reported preliminary cash and equivalents of $368.1 million, which is expected to fund operations into mid-2028. Lastly, Cargo Therapeutics announced the appointment of Dr. Kapil Dhingra to its Board of Directors and entered a sublease agreement with Vaxcyte, Inc.

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