Cantor Fitzgerald Double Downgrades NewLink Genetics After Incyte's Disappointing Trial

NewLink Genetics Corp NLNK, a late-stage biopharmaceutical company that focuses on cancer treatments, said on Friday it will review its clinical program after Merck & Co., Inc. MRK and Incyte Corporation INCY said their clinical trial of the similar drug epacadostat failed to meet expectations.

The Analyst

Cantor Fitzgerald's Mara Goldstein downgraded NewLink Genetics' stock rating from Overweight to Neutral with a price target slashed from $26 to $7.

The Thesis

Incyte's failed clinical study of a therapy similar to NewLink's indoximod resulted in NewLink's stock falling more than 40 percent Friday, despite the fact that the two therapies have different profiles and differentiated mechanisms, Goldstein said in the downgrade note. (See the analyst's track record here.)

NewLink's decision to revisit its own clinical program is reason enough to downgrade the stock, as it "casts a shadow" on its programs, including indoximod, Goldstein said. 

If NewLink's management doesn't offer investors greater visibility on the clinical steps for its program, then the stock is unlikely to regain much of the value it lost Friday, the analyst said. Cantor's revised $7 price target is based on the following, Goldstein said:

• A longer development time frame for indoximod from 2025 to 2028.
• A discount rate raised from 40 percent to 60 percent.
• A lower probability of ultimate success.
• The platform value for other programs that are ongoing.

Price Action

Shares of NewLink Genetics were trading lower by more than 4 percent at the time of publication Monday. 

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