ARCT - Arcturus downgraded at Baird on delayed catalyst and uncertainties in CSL deal

Baird downgraded the RNA therapeutics company Arcturus Therapeutics ( NASDAQ: ARCT ) on Thursday, citing an uncertain outlook for its recently announced partnership with Australia-based CSL Limited ( OTCPK:CSLLY ) ( OTC:CMHXF ) and seeing a delay in a key development program.

Arcturus ( ARCT ) shares have lost ~10% in late trading after the analysts led by Joel Beatty downgraded the stock to Underperform from Neutral with a price target of $18 per share.

The team is not convinced about the company's lead program for ARCT-810 in rare disease ornithine transcarbamylase deficiency after the company delayed a Phase 2 readout for the candidate to 2023 from Q4 2022.

Meanwhile, despite a $200M upfront payment from the CSL ( OTCPK:CSLLY ) deal for self-amplifying mRNA technology, "we believe it's highly uncertain whether future milestones to ARCT will meaningfully exceed the company's required costs," the analysts added.

Beatty and the team note that Arcturus ( ARCT ) is unlikely to receive "meaningful additional profit" in the near term from the deal amid signs that the collaboration requires the company to fund supportive activities despite uncertainty for milestone-linked reimbursements.

According to the terms of the deal, Arcturus ( ARCT ) is entitled to receive over $4B from CSL ( OTCPK:CSLLY ) in the form of potential development and commercial milestones.

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