Tuesday, Goldman Sachs adjusted its stance on Cytokinetics (NASDAQ:CYTK) stock, moving the rating from Buy to Neutral and lowering the price target to $60 from the previous $85.
The firm believes that while Cytokinetics may see more positive than negative developments in the next 12-18 months, these are largely anticipated and may not lead to significant outperformance compared to its peers.
The downgrade was influenced by the expectation that Cytokinetics will complete the New Drug Application (NDA) and Marketing Authorization Application (MAA) submissions for its heart disease drug, aficamten, within the third and fourth quarters of 2024.
Acceptance of these submissions is anticipated without the need for an Advisory Committee meeting, and a regular review cycle could result in U.S. approval and launch by the end of 2025.
Goldman Sachs also pointed out ongoing discussions regarding the scope of a potential Risk Evaluation and Mitigation Strategy (REMS) for aficamten, which could impact the stock's performance in the short term. The REMS program for aficamten is being compared to that of Bristol Myers (NYSE:BMY) Squibb's Camzyos, which might lead to Cytokinetics' stock being range-bound.
Regarding the company's pipeline, the firm expects Cytokinetics to further develop aficamten through additional studies (MAPLE, ACACIA, CEDAR) and other candidates, including CK-586.
However, they note that the investment in and potential royalties from omecamtiv mercarbil (OM) are justified only if the upcoming Phase 3 trials yield exceptionally positive results, due to the expected narrower patient subset.
Lastly, Goldman Sachs highlighted potential competitive risks from upcoming data for Edgewise Therapeutics' (EWTX) EDG-7500 program in the third quarter of 2024, which could heighten competition in the hypertrophic cardiomyopathy (HCM) market.
In other recent news, Cytokinetics, Incorporated has initiated a Phase 1 clinical trial for aficamten, a drug under investigation for the treatment of hypertrophic cardiomyopathy. The company reported positive results from a pivotal Phase 3 clinical trial and anticipates submitting a New Drug Application to the FDA in the third quarter of 2024.
Piper Sandler maintained an Overweight rating for the company, following a well-attended investor meeting that provided clarity on the company's strategies.
In financial news, Cytokinetics engaged in a strategic funding collaboration with Royalty Pharma, which includes a $575 million investment and a $500 million follow-on offering. This collaboration is expected to support Cytokinetics' multiple upcoming regulatory filings and commercial launches.
Additionally, the company's pro forma cash position is estimated at approximately $1.4 billion, bolstered by its strategic funding collaborations and equity financing rounds. These are the recent developments for Cytokinetics.
InvestingPro Insights
As Goldman Sachs revises its outlook on Cytokinetics, current metrics and analyst insights from InvestingPro could provide additional context for investors. With a market capitalization of approximately $6.61 billion, Cytokinetics is trading at a high Price / Book multiple of 60.89, which suggests a premium valuation compared to its book value as of the last twelve months ending Q2 2024. Despite the high valuation, analysts have revised their earnings downwards for the upcoming period, indicating potential concerns over the company's profitability.
InvestingPro Tips highlight that while Cytokinetics has experienced high returns over the past year, with a 71.54% increase in its share price, analysts do not anticipate the company to be profitable this year. This aligns with the firm's expectations of a regular review cycle for aficamten, potentially leading to a U.S. launch by the end of 2025. Additionally, Cytokinetics' liquid assets exceed its short-term obligations, which may provide some financial stability as it navigates the drug approval process. However, the company operates with a moderate level of debt and has been suffering from weak gross profit margins.
For investors seeking to delve deeper into Cytokinetics' financial health and future prospects, InvestingPro offers additional insights, including more InvestingPro Tips to guide investment decisions. To explore further, visit https://www.investing.com/pro/CYTK for a comprehensive analysis.
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