On Tuesday, CervoMed (NASDAQ:CRVO) shares, a biotech company with a market capitalization of $85 million, experienced a shift in stock rating as D. Boral (OTC:BOALY) Capital adjusted its stance from Buy to Hold.
The stock, which has declined nearly 48% over the past six months according to InvestingPro data, faces this downgrade following the release of clinical trial results for its drug, neflamapimod, which is being developed to treat dementia with Lewy bodies (DLB).
CervoMed recently disclosed the results from its Phase 2b RewinD-LB trial, which did not meet the primary or secondary endpoints, failing to show a statistically significant benefit over placebo. InvestingPro data reveals that two analysts have recently revised their earnings downward, with the company expected to remain unprofitable this year.
Although the drug was found to be safe, the desired plasma drug concentrations were not attained, which may have impacted the efficacy outcomes.
The lack of convincing results from the trial has led to a halt in preparations for the Phase 3 study. In light of these developments, D. Boral Capital has not only downgraded the rating but also removed the price target for CervoMed's stock. The firm has decided to withhold setting a new price target until there is more clarity regarding the drug's development path.
D. Boral Capital's decision is based on the recent data and the company's announcement that updated information on neflamapimod's progress will not be available until mid-2025. The firm's analyst cited the disappointing trial outcomes and the uncertainty surrounding the continuation of the drug's development as reasons for the downgrade.
Investors and stakeholders in CervoMed are now looking ahead to the next significant update from the company, which is expected in mid-2025. Despite recent setbacks, InvestingPro analysis indicates the company maintains a strong financial health score, with current assets significantly exceeding short-term obligations.
Until then, the focus remains on understanding the potential reasons behind the trial's lackluster results and determining the future direction for neflamapimod's clinical development. InvestingPro subscribers have access to 7 additional key insights about CervoMed's financial position and future prospects.
In other recent news, CervoMed has been making notable strides in its drug development and financial planning. The company's leading drug candidate, neflamapimod, has shown promising results in Phase 2a trials for Dementia with Lewy Bodies (DLB) and has been granted Orphan Drug Designation by the FDA.
The company is also anticipating Phase 2b study results, projected to be released in December 2024, which could position CervoMed as a first mover in the DLB treatment market.
Roth/MKM and Boral Capital Markets have initiated coverage on CervoMed with a Buy rating, based on the potential of neflamapimod and the company's strong financial position. The company has reported having $46.7 million at the end of the third quarter of 2024, with cash reserves expected to last through 2025.
Moreover, CervoMed has made significant changes in its leadership team, appointing Dr. Claudia Ordonez and Dr. Mark De Rosch as Senior Vice Presidents. The company also terminated a sales agreement with BTIG, LLC, marking a shift in its capital-raising strategy. These recent developments reflect CervoMed's commitment to advancing neflamapimod and meeting the needs of DLB patients.
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