On Tuesday, JMP Securities updated their assessment of Gritstone bio (NASDAQ:GRTS), raising the price target to $5.00 from the previous $4.00, while retaining a Market Outperform rating for the stock. This adjustment comes in the wake of Gritstone's recent announcement regarding its Phase 2/3 trial of the GRANITE personalized vaccine for patients with microsatellite stable colorectal cancer (MSS-CRC).
The firm cited the potential for an accelerated regulatory path, especially for patients at higher risk due to circulating tumor DNA (ctDNA). The analysts are encouraged by the preliminary progression-free survival (PFS) data, which, despite being early and having wide error estimates, suggest promising trends. These trends could pave the way for regulatory approval if they continue.
JMP Securities has increased the probability of approval for GRANITE from 50% to 60%, acknowledging the high unmet need and the difficulty in treating this particular cancer indication. The updated price target of $5.00 is derived from a risk-adjusted, discounted cash flow (DCF) analysis.
Following the data release, Gritstone bio announced a proposed financing, which led to the company's shares trading down by as much as 40%. However, JMP Securities views this decline as an opportunity to buy.
The analysts believe the early efficacy signals for GRANITE, including overall survival (OS) in the Phase 1 portion, along with the potential of Gritstone's EDGE technology platform and the development of self-amplifying vaccines for COVID-19, present a compelling case for the company's future prospects.
InvestingPro Insights
Following JMP Securities' optimistic outlook on Gritstone bio, real-time data from InvestingPro provides a broader financial perspective on the company. With a current market capitalization of $230.45 million and a forward-looking P/E ratio reflecting a value of -1.66, Gritstone's financial standing indicates challenges as well as potential. Despite a notable quarterly revenue growth of 143.62%, the company has faced an overall revenue decline of 18.05% in the last twelve months as of Q4 2023.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, suggesting that there may be positive developments on the horizon for Gritstone. However, it is also noted that the company is quickly burning through cash and has not been profitable over the last twelve months, which aligns with the concern for the company's financial sustainability raised by the recent financing announcement. The fact that Gritstone's liquid assets exceed short-term obligations is a positive sign, indicating that the company has some financial leeway to navigate its current challenges.
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