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On Friday, Stifel analysts adjusted their stance on Neumora Therapeutics shares, downgrading the biopharmaceutical company from Buy to Hold. The downgrade comes with a significant reduction in the price target, now set at $2.00, a steep decline from the previous target of $6.00. Currently trading at $1.52, the stock has experienced a dramatic 85% decline over the past six months, according to InvestingPro data. The change in valuation reflects Stifel’s reassessment of Neumora’s prospects following recent developments in the industry.
The downgrade was precipitated by an announcement from Johnson & Johnson that it would discontinue the phase 3 VENTURA program of aticaprant for adjunctive treatment in major depressive disorder (MDD) due to insufficient efficacy in the target patient population. Stifel analysts had previously viewed the potential success of aticaprant as a validation for the KORA mechanism, which is also the basis for Neumora’s navacaprant. However, the discontinuation casts doubt on the efficacy potential of this class of drugs.
The Stifel analysts noted that while Neumora’s shares are trading near cash value and the company has two additional phase 3 opportunities, the failure of aticaprant makes it challenging to maintain a strong defense for the stock. They acknowledged that effective MDD drugs can fail in clinical trials, yet the recent news from Johnson & Johnson has significantly impacted the outlook for Neumora’s pipeline.
The revised price target of $2.00 is based on a model that assumes a 15% probability of success for navacaprant, with a modest credit given to the company’s pipeline. This new valuation reflects the analysts’ tempered expectations for Neumora’s lead drug candidate in the wake of industry developments that have undermined confidence in similar treatments. According to InvestingPro’s Financial Health assessment, the company currently shows a weak overall score of 1.61, with particularly concerning metrics in profitability and price momentum.
Neumora’s management had previously argued that the KOASTAL-1 trial could have failed due to issues with conduct or execution, rather than an inherent problem with the drug’s efficacy. However, the Stifel analysts suggest that the failure of a related drug in a similar trial further undermines the potential for success in Neumora’s ongoing clinical programs.
In other recent news, Neumora Therapeutics reported its fourth-quarter 2024 financial results, surpassing earnings expectations with an adjusted loss per share of -$0.37, while analysts had projected a loss of -$0.62. The company also announced a temporary pause and optimization of its KOASTAL-2 and KOASTAL-3 clinical trials for the depression drug navacaprant, following the KOASTAL-1 study’s failure to meet its primary endpoint. These trials are expected to resume in March 2025, with topline data anticipated in early 2026. Neumora has discontinued its Phase II trial in bipolar depression to focus resources on the KOASTAL program but may revisit this indication in the future.
Additionally, Neumora reported $307.6 million in cash and marketable securities as of December 31, 2024, expected to fund operations into mid-2026. Research and development expenses increased to $200.9 million for 2024, driven by navacaprant clinical trials. Analyst firms Guggenheim and Stifel maintained their Buy ratings on Neumora, with Guggenheim setting a price target of $7 and Stifel adjusting its target from $26 to $6. Changes in leadership were also noted, with the departure of the former CEO and head of R&D. Despite these developments, analysts remain optimistic about the company’s future, particularly regarding the potential impact of Johnson & Johnson’s aticaprant study results.
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