Nkarta stock rating downgraded at William Blair to Market Perform

On Thursday, William Blair analysts adjusted their stance on Nkarta Inc. (NASDAQ: NKTX), moving from an Outperform rating to Market Perform. The firm’s analysts cited concerns over the company’s strategic choices and the competitive landscape in the autoimmune disease space as reasons for the downgrade. According to InvestingPro data, the company’s stock has fallen over 70% in the past year, with a current market capitalization of $133 million. InvestingPro analysis indicates the stock is currently trading below its Fair Value, suggesting potential upside despite recent challenges.

In a recent statement, William Blair analysts highlighted the positive aspects of Nkarta’s expansion into the primary membranous nephropathy (pMN) market. This move is seen as advantageous due to the lack of existing cell therapy trials targeting pMN, which implies minimal competition for patient enrollment, especially when compared to other diseases such as lupus nephritis. InvestingPro analysis reveals that while the company maintains a strong liquidity position with a current ratio of 27.29, it’s quickly burning through cash - one of several key insights available in the comprehensive Pro Research Report covering this biotech company.

However, the analysts expressed reservations about the modifications to the trial protocols, which now include the use of fludarabine (Flu) in the preconditioning regimen. The reasoning behind this decision remains unclear, raising questions about whether it was influenced by preliminary clinical data. The analysts noted that without a reduced lymphodepletion regimen, it becomes difficult to distinguish Nkarta’s NKX019 from other CD19 allogeneic cell therapies in the crowded autoimmune disease market.

Furthermore, while there is anticipation for the initial clinical data from the Ntrust-1 and Ntrust-2 trials expected in the second half of 2025, the analysts are uncertain if the data released will be substantial enough to act as meaningful catalysts for the stock. They suggest that investors may need to wait until 2026 for a more comprehensive dataset to fully assess the potential of Nkarta’s therapies.

In light of these factors, William Blair has adjusted their financial model for Nkarta, now projecting a full year 2025 loss of $144.7 million, or $1.95 per share. This revised outlook reflects the challenges and uncertainties that Nkarta faces as it attempts to navigate the highly competitive landscape of autoimmune disease treatments. InvestingPro data shows the company reported an EBITDA of -$122.81 million in the last twelve months, with two analysts recently revising their earnings expectations downward for the upcoming period. Discover more detailed financial analysis and 10 additional ProTips about NKTX with an InvestingPro subscription.

In other recent news, Nkarta Inc. announced its fourth-quarter and full-year 2024 financial results, which included a significant restructuring plan. This plan involves a 34% reduction in its workforce, affecting approximately 53 positions, as the company shifts its focus from oncology programs to autoimmune disease programs. Stifel analysts have adjusted their outlook on Nkarta, reducing the price target to $14.00 from $15.00 but maintaining a Buy rating. They highlighted the strategic harmonization of NKX019 dosing across multiple trials and the company’s recent workforce reduction as positive steps. H.C. Wainwright also reaffirmed its Buy rating with an $18.00 price target, noting the restructuring was not due to NKX019’s clinical performance but rather chemistry and manufacturing constraints.

Nkarta’s restructuring aims to streamline its path toward clinical milestones for its CD19-targeted allogeneic CAR-NK cell therapy, NKX019, with initial data expected in the second half of 2025. The company projects that these cost reductions will extend its cash runway into 2029, although H.C. Wainwright estimates it may last until mid-2028. The departure of several executives, including the Chief Financial and Business Officer, is part of the restructuring, with new roles being assigned internally. Stifel anticipates that the forthcoming data from the Ntrust-1 trials will be a key milestone for Nkarta and its investors.

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