Lyell Immunopharma Downgraded, Analyst Flags Concerns Over Acquisition Strategy

Last week, Lyell Immunopharma Inc. LYEL agreed to acquire ImmPACT Bio USA Inc., a privately owned clinical-stage biotechnology company.

Lyell has prioritized its pipeline to focus resources on its most differentiated CAR T-cell clinical programs, including IMPT-314 following the close of the acquisition and LYL119.

Also Read: Lyell Immunopharma Shares Plunge On One Patient Death In CAR-T Cell Therapy Cancer Trial

Lyell announced the discontinuation of the development of LYL797 to focus on the Phase 1 clinical trial of LYL119, which is expected to initiate enrollment of patients with platinum-resistant ovarian cancer or relapsed/refractory endometrial cancer this year or early next year.

The LYL845 tumor-infiltrating lymphocyte (TIL) program is also being discontinued, as the clinical data in patients with advanced melanoma did not meet pre-determined criteria for continued development.

Its next-generation TIL and rejuvenation programs that are in preclinical development will also be discontinued.

Lyell expects its cash balance to fund operations into 2027.

Deal terms include upfront consideration of $30 million in cash and 37.5 million Lyell shares.

ImmPACT shareholders will also be eligible for contingent consideration consisting of 12.5 million Lyell shares and a low single-digit royalty on future net sales.

BofA Securities has downgraded Lyell from Buy to Underperform, with a price target of $1, down from $6.

The analyst said, “While discontinuation of ‘797 isn’t a surprise, we think optimism is growing for next-gen ‘119’s improved therapeutic window.”

The acquisition of ImmPACT Bio for its IMPT-314 introduces complexities that could cloud the narrative. The analyst added that while the potential of ‘314 is visible, the program appears to lack clinical and commercial synergy, and with limited resources and rising competition, it risks becoming a distraction.

An analyst noted that with Lyell's focus on restarting its solid tumor program and expanding into hematology, it's challenging to maintain a positive outlook.

It remains uncertain if IMPT-314 can provide significant clinical improvements, and it will likely face tough competition from established players like Gilead Sciences Inc GILD, Bristol Myers Squibb & Co BMY, and Novartis AG NVS.

Price Action: LYEL stock is down 9.16% at $0.86 at last check Wednesday.

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