Tuesday, H.C. Wainwright adjusted its outlook on Aptose Biosciences (NASDAQ:APTO) shares, slashing the price target to $7.00 from the previous $23.00, while reaffirming a Buy rating for the stock.
The modification in the price target is attributed to several key factors, including an update to the base year and a revision in the fully diluted share count. Additionally, the firm has increased the probability of success (PoS) for Aptose's drug candidate tuspetinib to 40% from 35%.
The firm employs a higher discount rate of 30% for Aptose's shares, as opposed to the standard 15%, citing the company's imminent financial needs as it edges closer to the pivotal trial for tuspetinib in treating first-line acute myeloid leukemia (1L AML).
The cautious approach to valuation is further underscored by the exclusion of potential market opportunities for tuspetinib in myelodysplastic syndromes (MDS) and any contributions from another drug candidate, luxetinib, pending clarity on its development pathway and funding.
The current valuation is rooted in a clinical net present value (NPV) model, which is entirely based on the projected market performance of tuspetinib in both first-line and second-line AML treatments, with an approximate equal contribution from each. This model is designed to be adaptable, allowing for changes in various assumptions that could impact the drug's commercial prospects.
The analyst also noted that certain risks could prevent the stock from achieving the newly set price target. These risks include the possibility of unsuccessful or inconclusive clinical trial outcomes or the company's failure to obtain sufficient funding to advance its drug candidates through the necessary stages of development.
In other recent news, Aptose Biosciences has initiated a registered direct offering and concurrent private placement, aiming to raise approximately $4.43 million. The transaction involves the sale of 3,855,000 common shares and the issuance of series A and B warrants. Managed exclusively by H.C. Wainwright & Co., the offering is scheduled to conclude in 2024.
In addition, Canaccord Genuity has adjusted its price target on Aptose Biosciences, reducing it to $6.00 from $15.00, while maintaining a Buy rating. The adjustment comes as the firm anticipates a delay in the regulatory approval process for Aptose Biosciences' lead drug candidate, tuspetinib, with potential approval now expected in 2027.
Furthermore, Aptose Biosciences has highlighted the potential of tuspetinib in their first-quarter earnings call, focusing on its development as part of a novel triple drug combination therapy for frontline acute myeloid leukemia (AML) treatment.
The company aims to boost AML treatment response rates and survival with this new therapy, and a pilot study involving 20 to 36 older patients ineligible for intensive chemotherapy is expected. These are among the recent developments for the company.
InvestingPro Insights
Amidst the revised outlook by H.C. Wainwright on Aptose Biosciences, current data from InvestingPro offers additional context to the company's financial standing and market performance. Aptose holds more cash than debt on its balance sheet, which may provide some cushioning for its financial needs in the near term. However, the company is quickly burning through cash and has been flagged for weak gross profit margins, which could impact its ability to sustain operations without additional funding or revenue streams.
The market has responded to these challenges, with the stock trading near its 52-week low and experiencing significant price drops over the last year. The InvestingPro Data underscores the situation with a market cap of just $16.15 million USD, and a steep price/book ratio of 118.01 as of the last twelve months up to Q1 2024, signaling a potentially overvalued stock given its current financials. Moreover, with analysts not anticipating Aptose to be profitable this year, the risks outlined by H.C. Wainwright seem to be reflected in these metrics.
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