On Tuesday, Deutsche Bank adjusted its outlook on Sutro Biopharma (NASDAQ:STRO), a clinical-stage drug discovery, development, and manufacturing company. The firm's analyst revised the price target to $10 from the previous $12 while sustaining a Buy rating on the stock.
The change in the price target reflects an update to the bank's model for Sutro Biopharma following the first quarter results of 2024. The analyst cited concerns regarding cash burn and competitive pressures in the market as reasons for the adjustment. Despite these concerns, the firm continues to recommend a Buy rating on the company's shares.
Sutro Biopharma is currently developing treatments for patients with cancer. The analyst noted that the interim results for the company's REFRαME-O1 study in platinum-resistant ovarian cancer (PROC) are expected to be released by early 2027. However, the company faces competition from other pharmaceutical firms, which could impact patient enrollment in the United States.
Competitors such as Genmab (NASDAQ:GMAB)'s RINA-S, AbbVie (NYSE:ABBV)'s Elahere, and Merck's raludotatug are also developing treatments for ovarian cancer, which could pose challenges for Sutro Biopharma's trials. Specifically, Merck's Phase 2/3 REJOICE-Ovarian01 trial and Genmab's planned pivotal trial for RINA-S starting in 2025 are highlighted as potential hurdles for patient recruitment.
Genmab anticipates that its RINA-S treatment will be available on the market by 2027, assuming an accelerated approval pathway for patients with low to medium ovarian cancer is granted, based on a demonstration of a survival benefit. The analyst also mentioned that updated data on RINA-S is expected in the second half of 2024, which could further influence the competitive landscape.
InvestingPro Insights
As Sutro Biopharma (NASDAQ:STRO) navigates the competitive landscape of ovarian cancer treatments, real-time data and insights from InvestingPro provide a deeper look into the company's financial health and market position. According to InvestingPro, Sutro Biopharma holds a market capitalization of $354.86 million and is trading at a low revenue valuation multiple, which could signal a potential undervaluation by the market. Despite impressive revenue growth of 126.84% over the last twelve months as of Q4 2023, the company has been grappling with significant challenges, including a negative gross profit margin of -17.36% and an operating income margin of -58.07%. This suggests that while Sutro is expanding its top line, it is doing so at a cost to profitability.
InvestingPro Tips highlight that Sutro Biopharma is quickly burning through cash and analysts have revised their earnings downwards for the upcoming period, reflecting concerns similar to those raised by Deutsche Bank. Moreover, the company is not expected to be profitable this year, which could impact investor sentiment. Despite these challenges, Sutro Biopharma's liquid assets exceed its short-term obligations, providing some financial cushion. In terms of stock performance, there has been a large price uptick over the last six months, indicating increased investor interest or optimism about the company's future prospects.
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