Tuesday, Truist Securities revised its stock price target for Verastem (NASDAQ:VSTM), a biopharmaceutical company, to $15.00 from the previous $18.00, while maintaining a Buy rating on the stock. The adjustment follows a detailed financial evaluation by the firm.
The new price target is based on a probability-adjusted discounted cash flow (DCF) analysis. Truist Securities believes that the chosen 12.5% discount rate and a terminal growth rate of 2.0% are well-suited to account for the inherent risks associated with small to mid-cap (SMID-cap) biotechnology firms.
The revised valuation reflects Truist Securities' projections for Verastem's future financial performance. The firm has modeled unadjusted and adjusted global peak revenues for Verastem's key treatments. For the recurrent and refractory low-grade serous ovarian cancer (r/r LGSOC), they estimate unadjusted peak revenues of $564 million and adjusted revenues, considering U.S. sales and European Union royalties, of $283 million.
Moreover, for non-small cell lung cancer (NSCLC), Truist Securities forecasts unadjusted peak revenues of $192 million and no adjusted revenues. These projections are crucial for investors as they provide insight into the potential financial success of Verastem's treatments in their respective markets.
The maintained Buy rating suggests that Truist Securities continues to view Verastem's stock favorably despite the lowered price target. This indicates an expectation of the company's stock performance to be positive based on the underlying fundamentals and market potential of its treatments.
In other recent news, Verastem Oncology announced a public offering of its common stock and warrants, aiming to fund potential drug launches and ongoing clinical research. This follows the company's receipt of the FDA's Orphan Drug Designation for a drug combination intended to treat pancreatic cancer.
The firm's financial outlook has been revised by several analyst firms. H.C. Wainwright, for instance, lowered its 12-month price target for Verastem to $7.00, despite maintaining a Buy rating. Similarly, Mizuho Securities, B.Riley, and RBC Capital Markets also lowered their price targets, citing various concerns.
These developments come after Verastem reported second-quarter financial results, including milestone payments that exceeded expectations. The firm also disclosed plans to raise approximately $55 million through a proposed public offering. These are recent developments that are expected to significantly impact Verastem's operations and financial outlook.
InvestingPro Insights
As Verastem (NASDAQ:VSTM) navigates the volatile biopharmaceutical market, real-time data from InvestingPro provides a clearer picture of the company's financial health. With a market capitalization of $93.37 million, Verastem's financials show a company that is not currently profitable, reflected in a negative P/E ratio of -0.7. This aligns with analysts' expectations that the company will not be profitable this year.
InvestingPro Tips highlight that Verastem holds more cash than debt, which is a positive sign for liquidity and financial stability. However, it is also noted that the company is quickly burning through cash, which is a critical factor for investors to consider, especially in the capital-intensive biopharmaceutical industry. Additionally, Verastem's stock price has experienced significant volatility, having declined by over 30% in the past month and approximately 80% over the past three months.
For those interested in a deeper dive, there are over a dozen additional InvestingPro Tips available, offering further insights into Verastem's financial metrics and stock performance. These include considerations of shareholder yield, free cash flow yield, and the company's ability to meet short-term obligations. For a comprehensive analysis, investors can explore these tips on InvestingPro's platform.
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