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On Tuesday, Third Harmonic (NASDAQ:HLIT) Bio (NASDAQ:THRD) stock rating was downgraded by Morgan Stanley (NYSE:MS) from Overweight to Equalweight, accompanied by a significant reduction in the price target to $5.00 from the previous $20.00. Trading at $3.25 with a market capitalization of $209.52 million, the stock appears undervalued according to InvestingPro analysis. The decision comes as Third Harmonic Bio faces near-term uncertainties, particularly regarding the future of its THB335 treatment, which is currently in a Phase 2 study for Chronic Spontaneous Urticaria (CSU).
Morgan Stanley analysts noted that while Third Harmonic’s management sees a potential path forward for THB335, the company is also considering strategic alternatives and undergoing a major restructuring. This restructuring includes a 50% reduction in the workforce, which adds to the uncertainty surrounding the company’s outlook. Despite these challenges, InvestingPro data shows the company maintains strong liquidity with a current ratio of 42.5 and minimal debt-to-equity ratio of 0.01.
The analysts explained their decision, stating, "While mgt. believes there’s a potential path forward for THB335 (Ph2 study in CSU), due to circumstances, they also plan to explore strategic alternatives and restructure the company (50% work force reduction), creating near-term uncertainty. As such, we downgrade to EW and lower our PT to $5/share."
The downgrade and the new price target reflect the challenges Third Harmonic Bio is currently facing. The restructuring efforts and exploration of strategic alternatives indicate that the company is in a period of transition, which has direct implications for its financial health and stock performance.
Investors are advised to monitor Third Harmonic Bio’s forthcoming announcements and updates regarding its strategic plans and the progress of THB335 in clinical studies, as these will be crucial in determining the company’s future direction and potential recovery. With a beta of 2.67, the stock has shown significant volatility, and InvestingPro subscribers have access to 12 additional exclusive insights and a comprehensive research report that could help navigate this challenging period.
In other recent news, Third Harmonic Bio has seen significant developments. Raymond (NSE:RYMD) James recently downgraded Third Harmonic Bio’s stock rating from Outperform to Market Perform following the release of Phase 1 healthy volunteer data for THB335, the company’s sole pipeline asset. Jefferies also adjusted the price target on Third Harmonic Bio to $7.00, a significant reduction from the previous target of $15.00.
The company has announced positive Phase 1 clinical trial results for THB335 and is preparing for a Phase 2 study in chronic spontaneous urticaria (CSU) by mid-2025. In line with these developments, Third Harmonic Bio is initiating a strategic review to maximize shareholder value, which may include exploring a range of strategic transactions and business combinations.
The company’s financial position remains robust, with approximately $285 million in cash and cash equivalents as of December 31, 2024, and an estimated $262-267 million by the end of the second quarter of 2025. These recent developments reflect Third Harmonic Bio’s ongoing commitment to its operations and the advancement of THB335.
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