JPMorgan cuts Cargo Therapeutics stock rating to Underweight

On Thursday, JPMorgan analyst Brian Cheng downgraded Cargo Therapeutics (NASDAQ:CRGX) stock from Neutral to Underweight following the company’s disappointing clinical trial results. The $607 million market cap biotech company has seen its shares decline over 42% in the past year, with the stock currently trading at $13.19. The firm expressed concerns that the stock would underperform when compared to others in the same sector due to the recent failure of its leading drug candidate, firi-cel™, in the pivotal FIRCE-1 trial. According to InvestingPro data, while the company maintains a strong balance sheet with more cash than debt, it’s quickly burning through its cash reserves, a critical factor for clinical-stage biotechs.

Cargo Therapeutics experienced a significant setback as firi-cel™, a CD22 CAR-T therapy, did not replicate the efficacy and safety results seen in earlier studies for post CD19 LBCL treatment. The initial Overall Response Rate (ORR) was strong at 77%, with a Complete Response (CR) of 43%. However, the three-month CR rate sharply declined to just 18%. Additionally, the trial raised safety concerns due to an 18% incidence of Grade 3 or higher Immune Effector Cell-associated Neurotoxicity Syndrome (IEC-HS), a stark increase from the 3% rate observed in the previous single-site trial.

In response to these developments, Cargo Therapeutics announced it would cut roughly half of its workforce but would continue to develop its preclinical trispecific program, CRG-023, which targets CD19, CD20, and CD22. Phase 1 dose escalation for CRG-023 is anticipated to begin in the second quarter of the year, with potential updates expected later.

JPMorgan’s downgrade reflects a cautious outlook on Cargo Therapeutics’ future prospects. The firm pointed out that while management remains confident in the trispecific program, investor sentiment is likely to be subdued for the foreseeable future. This sentiment is partly due to the trispecific program’s use of the same CD22 CAR utilized in firi-cel™, albeit at a 40% lower expression level.

In light of these events, JPMorgan has withdrawn its December 2025 price target of $30 for Cargo Therapeutics and adjusted its expense assumptions to align with management’s guidance. The firm anticipates that it will take time for the company to regain investor confidence and for sufficient clinical data to be collected to assess the potential of the trispecific program. InvestingPro analysis shows the stock is currently trading below its Fair Value, with remaining analyst targets ranging from $28 to $34. Investors awaiting more clarity might want to mark March 21 on their calendars, when the company is scheduled to report its next earnings.

In other recent news, Cargo Therapeutics has experienced significant developments. The firm’s stock rating was downgraded by Jefferies, Piper Sandler, and Chardan Capital Markets due to the discontinuation of its Phase II Firi-cel program over safety and durability concerns. However, 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.

The company has also secured approximately $110 million from a private investment for further development of its CRG-023 therapy. Despite the setback with Firi-cel, Cargo Therapeutics 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. These are the recent developments concerning Cargo Therapeutics.

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