Street Calls of the Week
On Tuesday, RBC Capital Markets adjusted its stance on Intra-Cellular Therapies shares, downgrading the biopharmaceutical company from Outperform to Sector Perform. The firm, however, raised its price target on the stock to $132 from the previous $108. The revision follows last week's announcement that Johnson & Johnson (JNJ) intends to acquire Intra-Cellular Therapies for approximately $14.6 billion.
The downgrade by RBC Capital reflects a belief that Intra-Cellular's stock will now likely trade in alignment with the proposed acquisition price. The analyst's commentary highlighted the strong commercial performance of Intra-Cellular's lead drug, Caplyta, in treating schizophrenia and bipolar depression (BPD). This success is reflected in the company's impressive 46% revenue growth over the last twelve months. The drug is also anticipated to expand its label later this year to include major depressive disorder (MDD), backed by positive phase III trial results.
The new price target of $132 is based on the terms of the acquisition deal and the expectation that the transaction will close in the first half of 2025. RBC Capital's revised outlook suggests that the acquisition proposal has been factored into the valuation, with the stock expected to move in correlation with the acquisition price moving forward.
Intra-Cellular Therapies, traded on NASDAQ under the ticker (NASDAQ:ITCI), has been the subject of significant attention due to the acquisition news. Johnson & Johnson's proposed acquisition is seen as a strategic move to bolster its portfolio in the neuroscience space.
InvestingPro analysis shows the company maintains a strong financial position with a current ratio of 7.66, indicating robust liquidity. For deeper insights into ITCI's valuation and 14 additional ProTips, including comprehensive financial health metrics, subscribers can access the full Pro Research Report on the platform.
In other recent news, Johnson & Johnson's 'AAA' credit rating is under review by S&P Global Ratings due to its acquisition of Intra-Cellular Therapies Inc. The acquisition is expected to increase Johnson & Johnson's leverage, which has led S&P to place the company's ratings on CreditWatch Negative. Despite these concerns, Johnson & Johnson is expected to reduce its leverage by the end of 2026.
In relation to this, Piper Sandler has adjusted its outlook on Intra-Cellular Therapies, downgrading it from Overweight to Neutral, while increasing the price target to $132. This follows Johnson & Johnson's acquisition announcement. Morgan Stanley (NYSE:MS) also downgraded Intra-Cellular Therapies' stock rating to Equalweight from Overweight following the acquisition news.
In addition, RBC Capital Markets analysts have highlighted potential risks to biotech companies, including Intra-Cellular, due to the resignation of Dr. Patrizia Cavazzoni from the U.S. Food and Drug Administration (FDA). Meanwhile, Mizuho (NYSE:MFG) Securities raised the stock's price target from $100 to $140, maintaining an Outperform rating, following a favorable patent settlement for Intra-Cellular's Caplyta.
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