Analysts at Baird say they still like the long-term outlook for biotechnology company Arcellx Inc (NASDAQ:ACLX) after a clinical trial for its investigational new drug CART-ddBCMA for relapsed or refractory multiple myeloma was put on hold by the US Food and Drug Administration (FDA) following a patient’s death.
The analysts said they expected the negative regulatory update from Arcellx on Monday night to weigh on the stock, which closed down 7.2% at US$33.23 on Tuesday.
As such, they awarded the stock an ‘Outperform’ rating but lowered their price target from $55 to $40.
“While we still remain positive on the long-term outlook for the CART-ddBCMA program and see a number of extenuating circumstances played a role in the issuance of this clinical hold, we expect this negative clinical update will dampen sentiment surrounding the name in the near term and are reducing our price target to $40/share,” the analysts wrote in a note to clients.
“While we anticipate that sentiment surrounding Arcellx shares will dip on the heels of this announcement, we'd also note that Arcellx is well capitalized with $533.6 million in cash as of the end of 1Q23 (runway into 1H25), which should mitigate the risk of dilution while management works to get off hold.”
The analysts believe there is the potential the hold can be rapidly resolved.
“Moving forward, management plans to take a number of steps to help improve the safety of this study, which should hopefully lead to the rapid resolution of the hold,” they wrote.
However, as it is difficult to predict the timing of a resolution with certainty, the analysts wrote that they were taking a conservative approach and extending out the potential launch of CART-ddBCMA by six months.
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