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On Wednesday, Rocket Pharmaceuticals (NASDAQ:RCKT) experienced a significant shift in market perception as Goldman Sachs downgraded the company’s stock from Buy to Sell. The investment firm also drastically reduced its price target for the biotech company to $2.00 from the previous $13.00. The stock, currently trading at $2.39, has plummeted nearly 65% in the past week alone, according to InvestingPro data. This move came after a troubling update regarding Rocket Pharmaceuticals’ clinical trial for a treatment of Danon disease.
The downgrade was prompted by an announcement on Tuesday that the U.S. Food and Drug Administration (FDA) had placed a clinical hold on Rocket’s Phase 2 trial for its Danon disease therapy, RP-A501. The hold was a response to a severe adverse event; a patient developed capillary leak syndrome approximately one week after being dosed with RP-A501 in early May. Despite initial signs of improvement, the patient later succumbed to an acute systemic infection. The news has severely impacted the company, which InvestingPro data shows is currently valued at $266 million in market capitalization, with its stock trading at just 9% of its 52-week high of $26.98.
Rocket Pharmaceuticals believes the adverse event might be linked to the use of a C3 inhibitor administered before and after the infusion of RP-A501. This was part of a recent amendment to the trial protocol aimed at reducing complement activations and thrombotic microangiopathies (TMAs), which had been observed in several participants.
Goldman Sachs expressed concern over the lack of earlier disclosure about the protocol amendment and its impact on the trial’s timeline. The firm highlighted that these developments raise significant questions about the commercial viability of RP-A501 and add uncertainty to the ongoing discussions about the treatable market size for Danon disease.
Given these concerns and the potential implications for the drug’s approval and regulatory timeline, Goldman Sachs revised its perspective on Rocket Pharmaceuticals’ stock. The firm’s analysts noted the unexpected and concerning nature of the recent updates, leading to a reassessment of the investment outlook and the substantial decrease in the 12-month price target. Despite the current challenges, InvestingPro analysis indicates the company maintains a strong liquidity position with a current ratio of 9.19 and more cash than debt on its balance sheet. InvestingPro subscribers have access to 15 additional key insights about RCKT, including detailed analysis of its financial health and market position, available in the comprehensive Pro Research Report.
In other recent news, Rocket Pharmaceuticals has faced a series of significant developments impacting its financial outlook and stock ratings. The company reported a serious adverse event in its phase 2 trial for the drug candidate RP-A501, intended to treat Danon disease, resulting in a clinical hold by the FDA. This incident has led to multiple analyst firms adjusting their ratings and price targets for the company. Scotiabank (TSX:BNS) lowered its price target to $19 while maintaining a Sector Outperform rating, and BofA Securities cut its target to $9 but kept a Buy rating. Morgan Stanley (NYSE:MS) downgraded Rocket Pharmaceuticals from Overweight to Equalweight, slashing the price target to $7, and Jefferies downgraded the stock from Buy to Hold with a new target of $2.50. Leerink Partners also downgraded the stock to Market Perform and reduced the price target to $8. Analysts have expressed concerns over the safety and regulatory challenges facing RP-A501, with some noting the need for Rocket Pharmaceuticals to address these issues to regain investor confidence. The company’s cash reserves of $318.2 million are expected to support operations into 2027, providing some financial stability amid these challenges.
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