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On Wednesday, Rocket Pharmaceuticals (NASDAQ:RCKT) experienced a significant adjustment in its stock outlook as Morgan Stanley (NYSE:MS) revised its rating and price target for the company. The firm downgraded Rocket Pharmaceuticals from Overweight to Equalweight and dramatically reduced the price target to $7.00, a steep decline from the previous $42.00. The stock, currently trading at $2.33, has fallen nearly 89% over the past year and is hovering near its 52-week low of $2.19. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model.
The downgrade by Morgan Stanley comes amid growing uncertainties regarding Rocket Pharmaceuticals’ lead program, RP-A501, which is being developed for the treatment of Danon disease. The firm’s analyst cited concerns that have led to a conservative revision of the program’s launch timeline, now expected in 2028, a year later than originally anticipated. InvestingPro data shows the stock’s RSI indicates oversold conditions, while its current ratio of 9.19 suggests strong short-term liquidity despite ongoing challenges.
In addition to delaying the expected launch date, Morgan Stanley also adjusted the probability of RP-A501’s success. The likelihood of the program’s success was reduced from 80% to a mere 30%, reflecting the uncertainties related to the regulatory path forward for the treatment.
The reassessment of Rocket Pharmaceuticals’ prospects has had a tangible impact on the company’s market valuation. The new price target of $7 is based on the altered expectations for the Danon disease program and takes into account the company’s financial position. As of the first quarter of 2025, Rocket Pharmaceuticals reported having $318.2 million in cash reserves, which equates to roughly $3 per share. This cash position is anticipated to fund the company’s operations well into 2027, a slight shift from the previous estimate which extended into the fourth quarter of 2026. InvestingPro analysis highlights that while the company holds more cash than debt, it’s quickly burning through its reserves, with a market capitalization now at $251 million. Subscribers can access 16 additional ProTips and a comprehensive research report for deeper insights into RCKT’s financial health and market position.
In other recent news, Rocket Pharmaceuticals has faced multiple analyst downgrades following significant developments in its clinical trials. Jefferies downgraded Rocket Pharmaceuticals from Buy to Hold, reducing the price target to $2.50 from $29.00, due to an FDA clinical hold on its Phase II program for RP-A501, a gene therapy for Danon heart disease. Similarly, Leerink Partners downgraded the stock from Outperform to Market Perform, lowering the price target from $37.00 to $8.00, after a serious adverse event led to a clinical hold. TD Cowen also moved Rocket Pharmaceuticals from Buy to Hold, citing unresolved safety risks related to the treatment regimen in the same trial.
Conversely, William Blair maintained an Outperform rating, expressing optimism despite the clinical hold, and noted that further information on the safety concerns is awaited. BofA Securities adjusted its price target to $32 from $34 but retained a Buy rating, highlighting Rocket Pharmaceuticals’ strong financial position and future milestones. The company reported a slightly better-than-expected GAAP EPS and has $318 million in cash expected to last until the fourth quarter of 2026. Rocket Pharmaceuticals plans to update on the pivotal Phase II trial of RP-A501 by mid-year, with results anticipated by mid-2026.
These developments have impacted investor sentiment as Rocket Pharmaceuticals navigates through regulatory challenges and safety concerns. Investors are closely monitoring the company’s efforts to resolve these issues and the potential implications for its clinical programs.
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