GRTX - Galera cut to Underperform at BofA after FDA snub for lead asset

2023-08-11 09:17:54 ET

Galera Therapeutics ( NASDAQ: GRTX ) traded ~12% lower in the pre-market Friday after Bank of America downgraded the nano-cap biotech due to the FDA’s recent rejection of its lead candidate, avasopasem manganese, for a radiotherapy-induced complication in patients with head and neck cancer.

Galera ( GRTX ) said Wednesday that the FDA, in a Complete Response Letter, cited the need for an additional clinical trial for a potential resubmission of the marketing application for avasopasem.

While the management expects to seek a Type A meeting with the FDA to discuss the FDA’s decision and plans for a potential refiling of the marketing application, analyst Tazeen Ahmad is not convinced.

Highlighting the company’s precarious liquidity level and the setback for Galera’s ( GRTX ) lead program, which happened to be BofA’s only valuation driver, the analyst downgraded the stock to Underperform from Buy and lowered her price target to $0.50 from $7.00 per share.

Despite the company’s efforts to reduce staff in an effort to bolster its financial position, Ahmad calls its $38.8M cash balance a headwind, and restructuring initiatives will extend its cash runway only until Q2 2024.

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