On Monday, BofA Securities issued a downgrade for biotechnology company PepGen Inc. (NASDAQ: PEPG), moving its rating from Neutral to Underperform. The firm also reduced the price target for the company's shares to $3.00, a significant decrease from the previous target of $6.00.
The stock, currently trading at $3.69, has experienced significant volatility, with InvestingPro data showing a 72.87% decline over the past six months.
The action follows a recent announcement from PepGen that the U.S. Food and Drug Administration (FDA) has placed a clinical hold on their Investigational New Drug (IND) application. This application was intended to kickstart the phase 2 CONNECT2-EDO51 study in patients with Duchenne muscular dystrophy (DMD) in the United States.
The CONNECT2 25-week trial is currently active in the United Kingdom (TADAWUL:4280), with expectations to begin in the U.S. before the end of the year now thwarted by the FDA's hold. In addition, PepGen is conducting a sister phase 2 CONNECT1-EDO51 study, for which the company has reported full enrollment in the 10mg/kg dose cohort, with data anticipated by the end of 2025.
PepGen's management has not provided specific details regarding the FDA's clinical hold but expects to receive an official letter within the next 30 days. This is not the first instance of a clinical hold for PepGen, as their myotonic dystrophy type 1 (DM1) program faced a similar issue, which was resolved approximately five months later. However, the details of that hold were not disclosed by the company.
The repeated occurrence of a clinical hold has led BofA Securities to reassess the value of PepGen's EDO platform. The firm has consequently lowered the pipeline plug value to $350 million from the previous $500 million and made adjustments to the operating expenses due to the anticipated delay in trial initiation.
According to InvestingPro analysis, while PepGen maintains a strong current ratio of 8.47 and holds more cash than debt, the company is quickly burning through its cash reserves. For deeper insights into PepGen's financial health and 9 additional ProTips, consider exploring InvestingPro's comprehensive analysis platform.
This reassessment and the uncertainty surrounding the clinical hold have prompted the downgrade of PepGen's investment rating as BofA Securities awaits further validation of the platform in upcoming program updates. Despite the current challenges, broader analyst targets range from $6 to $26, suggesting potential upside scenarios. InvestingPro's Fair Value analysis indicates the stock may be currently undervalued, though investors should carefully consider the company's development pipeline and cash position.
In other recent news, PepGen Inc., a biotechnology firm, experienced a clinical hold on its Duchenne muscular dystrophy (DMD) treatment trial, CONNECT2-EDO51, by the U.S. Food and Drug Administration (FDA). However, the company's ongoing CONNECT1-EDO51 trial in Canada remains unaffected, with all participants having received at least one dose. PepGen's therapeutic candidate, PGN-EDO51, is designed to restore functional dystrophin protein production in about 13% of DMD patients.
BofA Securities has adjusted its outlook on PepGen, lowering its stock target due to trial delays and competition. This adjustment follows changes to the eligibility criteria in PepGen's phase 2 clinical trial, known as CONNECT1-EDO51. Despite these adjustments, BofA Securities maintains a neutral stance on the stock.
In corporate governance, PepGen announced the retirement of Board Director Christopher Ashton, effective September 2024, reducing the board's size from seven to six directors. The company also approved an Officer Exculpation Amendment, elected two new Class II directors, and ratified KPMG LLP as the fiscal year-end independent registered public accounting firm.
Furthermore, PepGen appointed Dr. Michelle Mellion as Chief Medical (TASE:PMCN) Officer and Dr. Hayley Parker as Senior Vice President, Global Regulatory Affairs. These appointments and governance changes are among the recent developments at PepGen.
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