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On Wednesday, Leerink Partners issued a downgrade for Rocket Pharmaceuticals (NASDAQ:RCKT) stock, moving from an Outperform rating to Market Perform. Accompanying this change, the firm significantly reduced the price target from $37.00 to $8.00. The stock, which has fallen nearly 65% in the past week and is trading near its 52-week low of $2.19, has seen its market capitalization drop to $251 million. According to InvestingPro data, the stock’s relative strength index suggests it’s currently in oversold territory. The decision followed a recent webcast by Rocket Pharmaceuticals discussing a serious adverse event (SAE) that resulted in a patient’s death due to acute systemic infection. This incident led to a clinical hold on the Phase 2 program for Danon disease.
Leerink Partners pointed out three main concerns that prompted the downgrade and price target adjustment. Firstly, there is a need to address safety uncertainties, which includes resolving the clinical hold and clarifying the necessity for C3 inhibition and future immunomodulatory regimens. Secondly, the firm emphasized the importance of re-establishing investor confidence by meeting revised timelines for several of Rocket Pharmaceuticals’ programs including LAD-I, Danon, and FA. Lastly, Leerink Partners highlighted the need to alleviate the balance sheet overhang by securing Pediatric Review Voucher (PRV) sales and significantly reducing operating expenses. Despite these concerns, InvestingPro analysis shows the company maintains a strong liquidity position with a current ratio of 9.19, and holds more cash than debt on its balance sheet. Get access to 14 additional exclusive ProTips and comprehensive financial analysis through InvestingPro’s detailed research reports.
The downgrade reflects a cautious stance from Leerink Partners regarding Rocket Pharmaceuticals’ ability to navigate through the challenges presented by the clinical hold and the subsequent impact on its development programs. The firm’s revised price target of $8.00 represents a substantial decrease from the previous target of $37.00, indicating a recalibration of expectations for the company’s stock performance.
Rocket Pharmaceuticals’ shares are anticipated to be influenced by the company’s actions to address the outlined concerns. Investors will be closely monitoring the company’s progress in resolving the clinical hold, rebuilding confidence in its development timelines, and managing its financial strategy in the wake of the recent adverse event. While analyst consensus remains cautiously optimistic with targets ranging from $10 to $55, InvestingPro’s Fair Value analysis suggests the stock may be undervalued at current levels, though investors should note the company is quickly burning through cash and isn’t expected to be profitable this year.
In other recent news, Rocket Pharmaceuticals has faced significant developments concerning its clinical trials and stock ratings. The company reported a better-than-expected GAAP EPS, surpassing consensus by $0.02, and maintains a robust financial position with $318 million in cash projected to last until the fourth quarter of 2026. This financial stability is expected to support progress through several key milestones, including updates on the pivotal phase 2 trial of RP-A501 for Danon disease and the rolling submission of RP-L102’s Biologics License Application for Fanconi Anemia. However, the trial for RP-A501 faced a setback due to a patient’s death, leading to a clinical hold imposed by the FDA, which has raised safety concerns.
The incident has prompted TD Cowen to downgrade Rocket Pharmaceuticals from Buy to Hold, highlighting unresolved safety risks associated with the trial. Meanwhile, William Blair remains optimistic, maintaining an Outperform rating and suggesting that the adverse event might be linked to a recent addition to the treatment protocol rather than the therapy itself. BofA Securities adjusted its price target to $32, maintaining a Buy rating, and expressed optimism for the company’s prospects in the latter half of the year. BMO Capital Markets also reiterated its Outperform rating, emphasizing the therapeutic benefits of RP-A501 despite the safety concerns.
Jefferies continues to hold a Buy rating with a price target of $29, noting the uncertainty surrounding the timing of key events due to the clinical hold. The company’s future developments will be closely watched as Rocket Pharmaceuticals addresses the FDA’s concerns and navigates the challenges in its gene therapy programs.
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