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On Tuesday, Raymond (NSE:RYMD) James made a notable change in their assessment of Third Harmonic (NASDAQ:HLIT) Bio (NASDAQ:THRD), downgrading the biotechnology company’s stock rating from Outperform to Market Perform. According to InvestingPro data, the stock has fallen significantly over the past three months and is currently trading near its 52-week low, with an RSI indicating oversold territory. The adjustment follows the presentation of Phase 1 healthy volunteer data for Third Harmonic Bio ’s sole pipeline asset, THB335. According to the analyst, although the data supports the advancement of THB335 to Phase 2 trials, it does not suggest a best-in-class profile. The concern is primarily due to robust tryptase reduction being linked to hematological adverse events (AEs), including a decrease in hemoglobin levels. This toxicity issue is expected to limit the doses of THB335 to levels that would only induce moderate tryptase reductions in the upcoming Phase 2 trials.
The firm’s decision is based on the uncertain future of THB335, considering these findings. Third Harmonic Bio is currently trading significantly below its cash value, which is approximately $6.30 per share based on the projected cash position in mid-2025. Despite the downgrade, the company is noted to have a strong balance sheet, with around $285 million in cash and cash equivalents at the end of 2024, and an expected $262-267 million by the end of the second quarter of 2025. InvestingPro analysis confirms the company’s solid financial position, with a current ratio of 42.5x and minimal debt-to-equity ratio of 0.01, indicating strong liquidity and financial stability. The stock appears undervalued based on InvestingPro’s Fair Value analysis. This financial stability is anticipated to support the company’s operations through the plans outlined in a recent conference call.
Third Harmonic Bio intends to proceed with the development activities of THB335 through the first half of 2025 to prepare for the initiation of a Phase 2 study in chronic spontaneous urticaria (CSU) by mid-2025. The company’s strategy moving forward, including the potential initiation of the Phase 2 study, may largely hinge on the results of its active exploration of strategic transactions and/or business combinations aimed at maximizing shareholder value.
In the near term, Third Harmonic Bio is focused on completing ongoing sub-chronic toxicology studies and submitting the necessary regulatory filings to position THB335 for Phase 2 initiation. The full Phase 1 clinical results are scheduled to be presented as a poster at the American Academy of Allergy, Asthma & Immunology (AAAAI) meeting on March 2, 2024.
In other recent news, Third Harmonic Bio, Inc. has reported Phase 1 clinical trial results for its drug candidate THB335, which demonstrated dose-dependent increases in exposure and reductions in serum tryptase, a biomarker of mast cell activation. The company is preparing for a Phase 2 study of the drug for chronic spontaneous urticaria (CSU) treatment. Despite the clinical progress, the company has decided to halt all non-THB335 related research and reduce its workforce by approximately 50%, as part of a strategic review process to maximize shareholder value.
In addition, Third Harmonic Bio’s financial position remains robust, with approximately $285 million in cash and cash equivalents as of December 31, 2024. After considering the projected expenses related to THB335 Phase 2 readiness, ongoing operations, and restructuring costs, the company estimates its cash balance will be between $262 million and $267 million by June 30, 2025.
Jefferies analyst Akash Tewari has adjusted the price target on Third Harmonic Bio to $7.00, a significant reduction from the previous target of $15.00, while maintaining a Hold rating on the company’s stock. Meanwhile, TD Cowen has been engaged to advise on the company’s strategic review process, which may include exploring a range of strategic transactions and business combinations.
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