On Thursday, JPMorgan issued a downgrade for biotech firm Metagenomi Inc (NASDAQ:MGX) from Overweight to Neutral, adjusting the price target significantly to $6.00 from the previous $16.00. The revision follows the unexpected termination of Metagenomi's partnership with Moderna (NASDAQ:MRNA), a decision announced after the market closed on the same day.
The collaboration's conclusion last Friday was reportedly a mutual decision, though the specifics behind the move remain undisclosed. The termination brings back to Metagenomi the rights for the PH1 co-co program, various pipeline programs, and the company's proprietary base editing and RIGS technology. JPMorgan expressed surprise at the timing and nature of the termination, underlining that the partnership was a vital component of their investment thesis for Metagenomi.
Despite the setback, JPMorgan does not foresee an immediate impact on Metagenomi's ongoing partnership with Ionis or on the near-term catalysts such as the NHP durability data expected in the second half of the year. However, the firm acknowledges that the loss of a significant partner like Moderna at this stage raises concerns about Metagenomi's future prospects.
With Metagenomi having a cash runway extending into 2027 and plans to file two Investigational New Drug (IND) applications by 2026, JPMorgan advises a cautious approach. The firm is looking for clearer signs of Metagenomi's execution capabilities and its path toward clinical testing before reconsidering its position.
In light of these developments, JPMorgan has updated its discounted cash flow (DCF) based Sum of the Parts (SOTP) model for Metagenomi, removing the standalone assumption for the PH1 program and revising estimates and expenses. The new price target of $6.00, set for December 2024, reflects these changes and the firm's adjusted outlook on the company's valuation.
InvestingPro Insights
In the wake of JPMorgan's reevaluation of Metagenomi Inc (NASDAQ:MGX), additional insights from InvestingPro underscore the company's financial standing and market perception. Metagenomi currently holds a market capitalization of $263.81 million, indicating a relatively modest size within the biotech industry. The company's financial health is highlighted by an InvestingPro Tip noting that it holds more cash than debt on its balance sheet, which is a positive sign for its financial stability.
However, other InvestingPro Tips reveal challenges ahead for Metagenomi. Analysts are not only expecting a sales decline in the current year but also projecting that the company will not be profitable within the same timeframe. The stock itself has struggled recently, with a one-month price total return of -31.38%, reflecting investor skepticism following the recent developments.
For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available, which can be accessed through InvestingPro's detailed reports. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a broader range of insights that could further inform investment decisions.
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