SMid-Cap Biotech: Barclays Downgrades Prothena, Upgrades Achillion

Barclays revised its view of several smaller mid-cap biotech stocks after the first-quarter earnings season, issuing re-ratings Monday for Prothena Corporation PLC PRTA and Achillion Pharmaceuticals, Inc. ACHN.

The Analyst

Barclays analyst Geoff Meacham downgraded Prothena from Equal Weight to Underweight and cut the price target from $14 to $12.

The analyst upgraded Achillion from Underweight to Equal Weight and maintained a $5 price target

The Thesis

Meacham sees limited near-term value-creating opportunities for Prothena. His reassessment of the company follows the discontinuation of its core development program in AL amyloidosis.

Other programs — namely partnerships with Roche in Parkinson's disease and Celgene Corporation CELG in ATTR Amyloidosis — do present some upside in the longer term, the analyst said. Both are too early in their development for the analyst to ascribe significant value, he said. 

Achillion has become better positioned to succeed, according to Meacham; he cited the company’s progress on shifting its focus from Hepatitis C to orphan diseases.

Given the company’s current price, the Factor-D program has not been fully priced in, warranting a higher valuation, Meacham said. Investors will likely wait to see more derisking data that's expected to be presented later this year, he said. 

“We do not have enough conviction to move to Overweight, but see minimal downside risk at current levels."

Elsewhere in the sector, Barclays reviewed its investment theses on Acceleron Pharma Inc XLRN and BioXcel Therapeutics Inc BTAI. Meacham reiterated Overweight ratings on both and maintained $54 and $15 price targets, respectively.

Price Action

Shares of Prothena opened sharply lower Monday but filled most of the gap quickly. Shares were trading down 3.47 percent at $14.75 at the time of publication.

Achillion shares showed an opposite pattern, spiking 6 percent after the open before pulling back. Shares were trading down 1.76 percent at $3.64 at the time of publication. 

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