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On Wednesday, Rodman & Renshaw adjusted their stance on Alto Neuroscience (NYSE: ANRO), moving from a Buy rating to a Neutral position. This change comes with a significant reduction in the stock's price target, now set at $5.50, down from the previous $43.
This adjustment was prompted by the company's announcement that its Phase 2b study for ALTO-100 did not meet the primary endpoint in treating patients with major depressive disorder (MDD).
The study's main measure, which assessed changes from the baseline in the Montgomery-Åsberg Depression Rating Scale (MADRS), failed to show a significant difference when compared to a placebo. Following the release of these results, ANRO shares fluctuated between $5 and $6 in after-hours trading, while the broader market, represented by XBI, remained largely unaffected.
The analyst from Rodman & Renshaw cited the unsuccessful outcome of the clinical trial as the reason for the downgrade and the decrease in the price target. The new target is reflective of the estimated cash position Alto Neuroscience is expected to have by the end of 2024.
The company's stock experienced volatility in after-market hours right after the announcement, indicating investor reaction to the unsuccessful trial results. This movement contrasted with the stability of the biotechnology index XBI during the same after-market trading period.
The updated Neutral rating and revised price target are now aligned with the company's current prospects following the clinical study's outcome.
In other recent news, Alto Neuroscience has experienced several significant developments. The company's ALTO-100 study did not meet its anticipated success, leading Baird to reduce the company's price target to $10.00 from $32.00, while still maintaining an Outperform rating.
Despite this setback, Alto Neuroscience is optimistic about future research efforts, particularly with the upcoming ALTO-300 readout. The company has also received an Outperform rating from Wedbush, and a Buy rating from both TD Cowen and Stifel.
The company has also initiated a Phase 2 study of ALTO-101, a drug for Cognitive Impairment Associated with Schizophrenia.
Finally, Alto Neuroscience has appointed Michael Hanley as its new Chief Operating Officer, bringing over 25 years of experience to the company's product planning and portfolio strategy.
InvestingPro Insights
In light of Alto Neuroscience's recent clinical trial setback, InvestingPro data provides additional context to the company's financial position. With a market capitalization of $391.71 million, ANRO's stock is currently trading at $14.53, which is 60.54% of its 52-week high. This reflects the market's reaction to the disappointing Phase 2b study results for ALTO-100.
InvestingPro Tips highlight that Alto Neuroscience holds more cash than debt on its balance sheet and its liquid assets exceed short-term obligations. These factors could provide some financial stability as the company navigates the aftermath of the unsuccessful trial. However, it's important to note that ANRO is not profitable over the last twelve months, with an adjusted operating income of -$54.21 million for the same period.
The company's price-to-book ratio stands at 2.18, which may be worth considering in light of the recent downgrade. Investors seeking more comprehensive analysis can access additional tips on InvestingPro, which offers a total of 5 tips for ANRO, providing a deeper understanding of the company's financial health and market position.
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