On Tuesday, BofA Securities adjusted its outlook on Prothena Corporation (NASDAQ:PRTA), reducing the biotechnology firm's price target from $33.00 to $31.00 while maintaining a Neutral rating on the stock.
The adjustment follows the departure of Prothena's Chief Medical Officer (CMO), Hideki Garren, MD, PhD, who left the company to join Roche as the head of Neurology Product Development.
Prothena's CEO, Gene Kinney, expressed confidence in the team built by Garren and reassured that ongoing clinical programs would not be affected by this transition. The company is in the process of searching for a new CMO. Concurrently, Prothena has appointed Chad Swanson, PhD, as the new Chief Development Officer.
The price target revision reflects a cautious stance due to the historical significance of CMO departures at development stage companies, which often leads to increased scrutiny of clinical studies. BofA Securities is closely monitoring Prothena's clinical pipeline, especially the PRX012 program for Alzheimer's disease, to gauge the potential commercial opportunities across different indications.
The discussion also covered a recent article in the journal Science that questioned the integrity of a scientist whose research on Parkinson's disease had previously aided Prothena with FDA interactions regarding its drug prasinezumab, which is partnered with Roche. However, Prothena's management clarified that there is currently no evidence of research misconduct related to prasinezumab.
The revised price target is based on a slightly higher risk adjustment for the prasinezumab program, now using a weighted average cost of capital (WACC) of 13%, increased from the previous 12%, and a reduced model value of $5 per share, down from $7. According to BofA Securities, the key factors influencing Prothena's valuation are the Alzheimer's disease program and the AL amyloidosis program, rather than the Parkinson's program.
In other recent news, Prothena Corporation reported its second-quarter financial results for 2024, which included operating expenses of $73.6 million and a cash balance of $564 million.
The company updated its full-year 2024 guidance, now expecting a net loss in the range of $120 million to $135 million. This improved financial outlook is largely due to an $80 million payment from Bristol Myers (NYSE:BMY) Squibb for global rights to PRX019.
RBC Capital and Oppenheimer adjusted their price targets for Prothena, reflecting a cautious stance on the company's pipeline programs. Prothena also announced significant changes in its executive leadership, with Chad Swanson taking over as the new Chief Development Officer.
Furthermore, Prothena entered into a licensing agreement with Bristol Myers Squibb for PRX019, which includes potential milestone payments of up to $617.5 million and royalties on net sales.
Piper Sandler reiterated an Overweight rating on Prothena shares, highlighting the potential of PRX019. These are some of the recent developments for Prothena Corporation.
InvestingPro Insights
Recent InvestingPro data provides additional context to Prothena Corporation's financial situation and market performance. Despite the company's impressive revenue growth of 276.98% over the last twelve months as of Q2 2024, Prothena is currently operating at a loss, with a negative operating income of $91.36 million for the same period. This aligns with the cautious stance taken by BofA Securities in their recent price target adjustment.
The company's market capitalization stands at $899.75 million, reflecting the market's current valuation of Prothena's potential. However, the stock has experienced significant declines, with a year-to-date price total return of -53.96% as of the latest data. This performance underscores the challenges faced by the company, including the recent departure of its CMO and the scrutiny of its clinical pipeline.
InvestingPro Tips highlight that Prothena's stock price is significantly below its fair value based on analyst targets, which is set at $56. This suggests potential upside if the company can successfully navigate its current challenges and advance its clinical programs. Additionally, InvestingPro calculates its own fair value for Prothena at $21.24, which is still above the current trading price.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Prothena Corporation, providing deeper insights into the company's financial health and market position.
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