U.S. stocks rise on Fed cut bets; earnings continue to flow
On Thursday, Piper Sandler adjusted its stance on Cargo Therapeutics (NASDAQ:CRGX), downgrading the stock from Overweight to Neutral and significantly reducing the price target to $4.00 from the previous $34.00. The stock, which has declined over 42% in the past year according to InvestingPro data, maintains a strong balance sheet with more cash than debt and a healthy current ratio of 18.95. The reevaluation follows the discontinuation of the phase 2 study for the company’s firi-cel treatment, FIRCE-1, due to concerns over the balance of risks and benefits. The treatment, which was being developed for cancer, showed suboptimal durable complete responses and was associated with serious adverse events, including immune effector cell-associated hemophagocytic lymphohistiocytosis-like syndrome (IEC-HS) ranging from grade 3 to 5.
The decision to downgrade the rating was influenced by the unexpected halt of the FIRCE-1 study, especially since similar issues were not reported during the phase 1 study conducted by Stanford at the same dose level. The phase 1 trial’s absence of grade 3+ IEC-HS incidents had not indicated such adverse outcomes. With a market capitalization of $607 million, InvestingPro analysis suggests the stock is currently undervalued, despite recent setbacks. Subscribers can access 8 additional ProTips and comprehensive financial metrics to better evaluate the company’s prospects.
Despite the setback with firi-cel, Cargo Therapeutics plans to proceed with the development of other treatments in its pipeline. The company aims to focus on advancing its tri-specific CAR T candidate, CRG-023, as well as its allogeneic platform, which are both part of its broader strategy in cancer treatment development. While the company is currently unprofitable, InvestingPro data shows five analysts have revised their earnings expectations upward for the upcoming period.
Piper Sandler’s analyst noted the impact of the discontinued firi-cel program on the investment firm’s valuation model, leading to the revised price target of $4 per share. The firm’s new neutral rating reflects a recalibration of expectations for Cargo Therapeutics’ stock performance in light of the recent clinical developments.
In other recent news, Cargo Therapeutics has discontinued its Phase 2 FIRCE-1 clinical trial due to safety concerns and an unfavorable benefit/risk profile. This decision prompted Chardan Capital Markets to revise its stock rating from Buy to Neutral. The company also plans to reduce its workforce by approximately 50% to conserve cash. Despite these developments, Cargo Therapeutics reported having preliminary cash and equivalents of $368.1 million, which is expected to fund operations into mid-2028. Additionally, Clear Street has initiated coverage on Cargo Therapeutics with a Buy rating and a $28 target, mainly due to the potential of the company’s drug candidate, Firi-cel. Cargo Therapeutics has also secured approximately $110 million from a private investment for further development of its CRG-023 therapy. Lastly, the company has entered a sublease agreement with Vaxcyte, Inc. and announced the appointment of Dr. Kapil Dhingra to its Board of Directors.
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