Bullish indicating open at $55-$60, IPO prices at $37
Tuesday, Wells Fargo (NYSE:WFC) analysts downgraded Ironwood Pharmaceuticals , listed on (NASDAQ:IRWD), from Overweight to Equal Weight, significantly lowering the price target to $1.00 from the previous $7.00. The stock, currently trading at $0.65, has experienced a dramatic 42% decline in the past week alone. The downgrade follows the FDA’s request for a new trial for Ironwood’s drug candidate apraglutide, which is intended to treat short bowel syndrome with intestinal failure (SBS-IF). According to InvestingPro data, the stock’s RSI suggests it’s in oversold territory.
According to the Wells Fargo analyst, the FDA’s requirement for an additional confirmatory trial represents a considerable obstacle for apraglutide, which had been expected to launch early the next year based on initial Phase 3 trial results. While the company maintains a healthy current ratio of 4.69, indicating strong short-term liquidity, the new trial requirement is likely to exert additional financial strain on Ironwood Pharmaceuticals, which already carries a substantial debt of $599.5 million. The analyst noted that the company’s decision to seek strategic alternatives while continuing apraglutide’s development is a direct response to this challenge.
The FDA’s request delays what was considered a key near-term growth driver for Ironwood. The company’s financial resources are expected to be further pressured by the costs associated with conducting another trial. This development has led to the reduction in the discounted cash flow (DCF)-based price target to $1 per share.
Ironwood Pharmaceuticals has not yet provided a detailed plan on how it intends to manage the additional financial burden or the nature of the strategic alternatives it is considering. The company’s focus remains on the development of apraglutide despite the setback.
The stock’s downgrade and the sharp decrease in price target reflect the heightened risk profile for Ironwood Pharmaceuticals following the FDA’s request. Investors are advised to monitor the company’s forthcoming strategies to address the challenges posed by the additional trial requirements. InvestingPro analysis indicates the stock is currently undervalued, with 12 additional ProTips and comprehensive financial metrics available to subscribers. For deeper insights into Ironwood’s financial health and future prospects, access the detailed Pro Research Report, part of the extensive analysis available for over 1,400 US stocks on InvestingPro.
In other recent news, Ironwood Pharmaceuticals reported fourth-quarter adjusted earnings per share of $0.02, which fell short of analyst estimates of $0.06. The company’s revenue was $90.55 million, slightly below the expected $92.5 million. Meanwhile, Jefferies downgraded Ironwood’s stock from Buy to Hold, reducing the price target from $8.00 to $0.70 due to concerns about the FDA’s focus on apraglutide’s lower exposure levels in clinical trials. Similarly, Leerink Partners cut their price target to $1.00 from $3.00, maintaining a Market Perform rating, after Ironwood announced the need for an additional Phase 3 trial for apraglutide. The FDA’s requirement for this trial has delayed the drug’s approval, impacting Ironwood’s strategic plans. Despite these challenges, Ironwood has started a rolling New Drug Application submission for apraglutide, aiming for completion by Q3 2025. The company also reported a 15% decline in U.S. net sales of Linzess for 2024, although prescription demand grew by 11% year-over-year. Ironwood ended 2024 with $88.6 million in cash and cash equivalents, generating $103.5 million in cash from operations for the year.
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