On Wednesday, JPMorgan (NYSE:JPM) issued a downgrade for Rapt Therapeutics (NASDAQ:RAPT) from Overweight to Neutral, significantly adjusting the price target to $15 from the previous $35. This change follows the recent announcement that RAPT's primary drug candidate, zelnecirnon, was put on clinical hold by the FDA due to a serious adverse event.
The decision to downgrade was influenced by the uncertainty surrounding the resolution timeline for the clinical hold on zelnecirnon. Rapt Therapeutics is currently awaiting detailed feedback from the FDA and will need to address their forthcoming requests, the specifics of which are still not clear. Although the company indicated that the liver failure incident in the phase 2b atopic dermatitis study appeared to be an isolated case, the full implications are yet to be determined.
The clinical hold has also cast doubt on the integrity of the data from the phase 2b atopic dermatitis study, whose results were expected around mid-year. The potential impact on the study's findings and the ability to select an appropriate dose for future trials add to the reasons for the lowered rating and price target. JPMorgan's revised valuation reflects diminished peak sales projections and the probability of success for zelnecirnon.
In light of these developments, RAPT shares experienced a drop of over 70%. JPMorgan's report highlights the difficulty in recommending the purchase of RAPT stock at this time, given the numerous unknowns. The firm's analysts are adopting a cautious stance until more information becomes available regarding the FDA's feedback and the subsequent steps Rapt Therapeutics will take.
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