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On Friday, Scotiabank (TSX:BNS) analyst George Farmer reduced the price target for Adaptimmune Therapeutics plc (NASDAQ:ADAP) to $1.40 from the previous $3.15. Despite the significant reduction, the analyst retained a Sector Outperform rating on the company’s stock. The revision comes as the stock has declined nearly 80% over the past year, currently trading at $0.28, near its 52-week low of $0.26. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.
Farmer’s assessment suggests that the slower-than-expected uptake of Adaptimmune’s cancer therapy, Tecelra, coupled with financial constraints, could force the company to undergo substantial restructuring. While InvestingPro data shows the company maintains more cash than debt and has a healthy current ratio of 3.85, it is quickly burning through its cash reserves. The revised price target is based on the assumption that the company will cease all research and development activities, including clinical trials for Tecelra and regulatory efforts for another therapy, lete-cel. The goal of these measures would be to prepare Adaptimmune for a potential sale.
The valuation model used by Scotiabank now anticipates a possible acquisition offer at $0.23 per outstanding share, aligning with the new $1.40 price target per American Depository Share (ADS). Despite the lowered expectations for the company’s immediate future, the Sector Outperform rating remains in place. This rating reflects the potential for stock price appreciation from current levels and the acknowledged clinical efficacy of Tecelra for patients who are eligible for the treatment.
Farmer expressed a belief that while the stock might struggle in the short term due to the perceived risk of insolvency, there is still an upside based on the clinical value of the company’s offerings. The analyst’s comments indicate a cautious but optimistic view of Adaptimmune’s potential, even as the company faces immediate financial and operational challenges.
In other recent news, Adaptimmune Therapeutics has reported its fourth-quarter 2024 financial results, revealing a product revenue of $1.2 million from its lead asset, Tecelra. The company has set a sales target of $25 million for 2025, indicating a significant revenue increase in the coming quarters. Adaptimmune has also announced strategic cost reductions by discontinuing its preclinical PRAME and CD70 programs, which are expected to save approximately $75-$100 million over the next four years. Despite these efforts, the company acknowledged going concern issues and has engaged a bank to explore strategic options to address its financial stability.
Mizuho (NYSE:MFG) Securities recently reiterated its Outperform rating for Adaptimmune, maintaining a price target of $1.50, following the company’s updates on Tecelra’s revenue and strategic changes. Analysts from Mizuho expressed a positive view on the execution of Tecelra’s launch but noted the lack of detailed financial results has increased focus on Adaptimmune’s long-term prospects. Investors are keenly awaiting the forthcoming financial results to gain further insights into the company’s operational performance amidst these challenges.
Adaptimmune’s management remains optimistic about its growth trajectory, driven by recent product launches and strategic cost reductions. The company aims to achieve profitability by 2027 and is actively exploring partnerships and monetization opportunities to support its financial goals. The potential launch of LetyCell in 2027, with breakthrough therapy designation, is expected to further bolster future growth.
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