Tuesday, a Jones Trading analyst announced a downgrade for Gritstone bio (NASDAQ:GRTS) from Buy to Hold. The decision follows the release of additional interim Phase 2 data for the GRANITE study in MSS-CRC, which did not show a significant benefit in the overall patient population.
The analyst noted that the progression-free survival (PFS) data were directionally positive but did not inspire confidence in the topline results at this time. There was a mention of potential utility in future studies for a subpopulation with low disease burden, potentially in the adjuvant or neoadjuvant settings. However, due to capital constraints, it is not expected that Gritstone will run these studies.
The firm's position on Gritstone could change if two conditions are met: first, if the company secures sufficient cash to continue operating the program, and second, if there is continued PFS benefit in patients with low levels of circulating tumor DNA (ctDNA-low). Until such developments occur, the analyst has chosen to remain on the sidelines and await further updates.
In conjunction with the downgrade, the analyst has also withdrawn the previous price target of $5 for Gritstone bio's stock. This decision reflects the lower confidence in the company's neoantigen vaccine programs based on the recent data. Gritstone bio and its stakeholders are now looking ahead for more definitive results and potential financial developments that may impact the company's research trajectory.
In other recent news, Gritstone bio reported encouraging interim results from its Phase 2 study of the GRANITE cancer vaccine. The study demonstrated a 21% relative risk reduction of disease progression or death for patients treated with GRANITE, which increased to 38% in patients with a low disease burden. Despite these promising results, JMP Securities downgraded Gritstone bio from Market Outperform to Market Perform due to concerns about the company's financial position. However, other analyst firms such as TD Cowen and Piper Sandler have maintained their positive ratings on the company.
Gritstone bio's second-quarter report revealed a net loss of $23 million, with cash reserves of $62 million and $40 million in debt. To address financial challenges, Gritstone has engaged Raymond James as a financial advisor to explore strategic options. Other recent developments within Gritstone bio include the election of Elaine Jones, Ph.D., and Clare Fisher to its Board of Directors, and the approval of executive officers' compensation by stockholders.
InvestingPro Insights
The recent downgrade of Gritstone bio (NASDAQ:GRTS) aligns with several InvestingPro metrics and tips that highlight the company's financial challenges. According to InvestingPro data, Gritstone's market capitalization stands at a modest $26.1 million, reflecting investor caution. The company's revenue for the last twelve months as of Q2 2024 was $14.61 million, with a concerning gross profit margin of -718.3%, underscoring the financial strain mentioned in the analyst's report.
InvestingPro Tips indicate that Gritstone is “quickly burning through cash” and “suffers from weak gross profit margins,” which corroborates the analyst's concerns about capital constraints for future studies. Additionally, the tip that “analysts do not anticipate the company will be profitable this year” aligns with the downgrade rationale.
Despite these challenges, it's worth noting that Gritstone's stock has shown a “strong return over the last month,” with a 21.62% price total return. This suggests that some investors may still see potential in the company, possibly in line with the analyst's mention of future utility in specific subpopulations.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips that could provide further insight into Gritstone bio's financial health and market position.
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