On Wednesday, Gritstone bio (NASDAQ:GRTS) was downgraded from Buy to Neutral with a price target slashed to $1.00 from $3.00 by B.Riley. The decision followed the release of updated progression-free survival (PFS) data from Gritstone's Phase II/III trial for its cancer vaccine, GRANITE. The vaccine is being evaluated for use in first-line microsatellite stable colorectal cancer (MSS-CRC).
The trial data, released on September 30, 2024, showed a 21% reduction in the risk of disease progression in the overall patient population. Patients with lower baseline circulating tumor DNA (ctDNA) experienced a 38% reduced risk. The report highlighted that 33% of patients treated with GRANITE and 23% of control patients remained progression-free. Additionally, ctDNA levels were below the limit of quantification in nearly all GRANITE patients compared to the control group.
The management of Gritstone bio anticipates that ctDNA suppression in the GRANITE arm will continue with further follow-up. The safety profile of the vaccine was deemed favorable, with no treatment discontinuations due to adverse events and only mild symptoms reported, except for one serious event related to fatigue.
Despite these positive findings, the analyst expressed concerns over the company's financial position. Gritstone's limited cash reserves, expected to last until the end of the fourth quarter, pose a challenge to the continued exploration of GRANITE across various solid tumors. This situation is exacerbated by the company's $40 million debt balance and the associated covenants.
To address these financial constraints, Gritstone management has engaged a financial advisor to explore strategic alternatives. However, the outcome and potential value of these efforts remain uncertain, prompting the downgrade and price target adjustment. The analyst cited a lower-than-expected efficacy profile and increased cost of capital due to the uncertainty surrounding the company's financial strategy as reasons for the change in rating.
In other recent news, Gritstone bio has been in the spotlight due to several developments. The biotech company's recent interim Phase 2 data for its GRANITE cancer vaccine showed promising signs, with a 21% relative risk reduction of disease progression or death, which increased to 38% in patients with a low disease burden.
However, Jones Trading and JMP Securities downgraded Gritstone bio, citing concerns about the company's financial position and interim data. Meanwhile, TD Cowen and Piper Sandler maintained their positive ratings on the company.
Gritstone bio reported a second-quarter net loss of $23 million, with cash reserves of $62 million and $40 million in debt. To address financial challenges, the company has engaged Raymond James as a financial advisor to explore strategic options. In addition, Gritstone bio has seen changes in its Board of Directors with the election of Elaine Jones, Ph.D., and Clare Fisher. The company's stockholders have also approved the compensation of executive officers.
InvestingPro Insights
Recent data from InvestingPro paints a challenging picture for Gritstone bio (NASDAQ:GRTS), aligning with the analyst's concerns. The company's market capitalization has dwindled to just $25.97 million, reflecting the market's skepticism about its prospects. This is further evidenced by the stock's significant decline, with a one-year price total return of -87.22% as of the latest data.
InvestingPro Tips highlight that Gritstone is "quickly burning through cash" and "operates with a significant debt burden," corroborating the analyst's worries about the company's financial position. The stock is also "trading near 52-week low," which underscores the market's negative sentiment following the recent trial data release and financial concerns.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for Gritstone bio, providing a deeper understanding of the company's financial health and market performance.
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