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Wednesday, Scotiabank (TSX:BNS)’s analyst Greg Harrison revised the price target for Rocket Pharmaceuticals (NASDAQ:RCKT) to $19.00, a significant decrease from the previous target of $51.00. Despite this change, Harrison maintained a Sector Outperform rating on the company’s stock. The revision comes as RCKT shares have fallen nearly 65% in the past week, now trading at $2.33, close to its 52-week low of $2.19. According to InvestingPro data, analyst targets for the stock currently range from $2.50 to $46.00, with technical indicators suggesting oversold conditions. The adjustment comes after the Food and Drug Administration (FDA) placed a clinical hold on the phase 2 trial of Rocket’s drug candidate RP-A501, which is being developed for the treatment of Danon disease.
The clinical hold was initiated following a serious adverse event (SAE) involving one patient who developed complications related to capillary leak syndrome and subsequently died after an acute systemic infection. Prior to this incident, RP-A501 had demonstrated promising efficacy and safety results. Despite the setback, InvestingPro analysis shows the company maintains a strong liquidity position with a current ratio of 9.19 and more cash than debt on its balance sheet.
Harrison noted that this unfortunate event has cast a shadow of uncertainty over the future of the Danon disease program and has delayed critical clinical milestones. Rocket Pharmaceuticals is currently performing a thorough analysis to determine the root cause of the SAE, with a focus on a recently introduced immunomodulatory agent. The company plans to collaborate with the FDA to decide on the next steps for the program.
Although acknowledging the severity of the setback, Harrison expressed belief in the potential for the safety concerns to be addressed. However, he anticipates that investors will likely adopt a cautious stance until the safety profile of RP-A501 is clarified. The new price target of $19.00 reflects a reduced probability of success (PoS), which has been adjusted to 50% from the previous 75%, due to the implications of the clinical hold on the Danon program. Harrison concluded that, despite the current challenges, there is still considerable upside in Rocket Pharmaceuticals’ intrinsic value from its current stock price level. This view aligns with InvestingPro’s Fair Value analysis, which suggests the stock is currently undervalued. For deeper insights into RCKT’s financial health, valuation metrics, and 16 additional ProTips, subscribers can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Rocket Pharmaceuticals has faced a series of significant developments affecting its operations and investor outlook. The company recently reported a patient death in its Phase 2 trial for the RP-A501 treatment targeting Danon disease, which has led to a clinical hold by the FDA. This incident has prompted several analysts to reevaluate their positions on Rocket Pharmaceuticals. BofA Securities maintained a Buy rating but cut the price target to $9 from $32, citing the tragic event as a factor for near-term volatility. Morgan Stanley (NYSE:MS) downgraded the stock from Overweight to Equalweight and reduced the price target to $7 from $42, due to uncertainties in the RP-A501 program and a revised launch timeline.
Jefferies also downgraded Rocket Pharmaceuticals from Buy to Hold and slashed the price target to $2.50 from $29, requiring more clarity on resolving the FDA’s concerns. Similarly, Leerink Partners adjusted their rating from Outperform to Market Perform, lowering the price target to $8 from $37, emphasizing the need to address safety uncertainties and re-establish investor confidence. TD Cowen followed suit, downgrading the stock from Buy to Hold, highlighting unresolved safety risks associated with the trial’s complications. These recent developments have led to a recalibration of expectations for Rocket Pharmaceuticals, with investors closely monitoring the company’s response to these challenges and its future clinical development plans.
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