H.C. Wainwright cuts PepGen stock target to $16, maintains Buy rating

On Friday, H.C. Wainwright adjusted its financial outlook for PepGen Inc. (NASDAQ:PEPG), reducing the price target to $16.00 from the previous $26.00 while continuing to endorse the stock with a Buy rating. The adjustment follows PepGen’s recent disclosure of safety data from its CONNECT1-EDO51 Phase 2 clinical trial. The stock, currently trading at $1.44, has experienced significant pressure, falling nearly 88% over the past six months. According to InvestingPro analysis, the stock is currently trading near its 52-week low of $1.42.

PepGen, which is conducting the trial in Canada, reported that two participants experienced asymptomatic hypomagnesemia. This condition was addressed with oral magnesium supplements, returning their magnesium levels to normal, indicating that the side effect is reversible. Despite this, dosing was temporarily halted for one participant due to a reduced estimated glomerular filtration rate (eGFR), although the eGFR levels did not meet the criteria for dose-limiting toxicity. The eGFR has since improved after dosing was paused, further suggesting the reversibility of the effect.

However, the occurrence of these safety signals, particularly in the context of the oligonucleotide space in Duchenne muscular dystrophy (DMD) treatments, has raised concerns. Health Canada has permitted the continuation of the trial for the 5 mg/kg and 10 mg/kg cohorts but has requested further clarification on the safety findings before allowing higher dose escalations.

This increased regulatory scrutiny comes on the heels of a clinical hold placed on CONNECT2-EDO51 in the United States. In light of these developments, H.C. Wainwright has revised its probability of success (PoS) for the drug candidate from 40% to 25%, citing the need for clarification on the cause of eGFR reduction. This reassessment has led to the removal of a 15% premium previously attributed to PGN-EDO51’s risk-reward profile, resulting in the lowered price target. InvestingPro data shows the company maintains strong liquidity with a current ratio of 8.47, though it’s quickly burning through cash. Subscribers can access 15 additional ProTips and comprehensive financial metrics to better assess the investment opportunity.

In other recent news, PepGen Inc., a biotechnology firm, has been making progress with its CONNECT clinical program for PGN-EDO51, a potential treatment for Duchenne muscular dystrophy (DMD). The CONNECT1-EDO51 Phase 2 trial in Canada has completed enrollment, with participants continuing in a long-term study extension. However, the U.S. FDA has placed a clinical hold on the CONNECT2-EDO51 Phase 2 trial’s initiation in the United States, requiring further supportive data for the dosing levels planned.

PepGen has also faced a downgrade from BofA Securities, moving its rating from Neutral to Underperform, following the FDA’s clinical hold. BofA Securities reassessed the value of PepGen’s EDO platform, lowering the pipeline plug value to $350 million from the previous $500 million, and adjusting the company’s operating expenses due to the anticipated delay in trial initiation.

In other developments, PepGen announced the retirement of Board Director Christopher Ashton, effective September 2024, and the appointment of Dr. Michelle Mellion as Chief Medical (TASE:PMCN) Officer and Dr. Hayley Parker as Senior Vice President, Global Regulatory Affairs. These are among the recent developments at PepGen.

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