GRPH - Graphite Bio adds 10% most in eight months even as downgrades pile up

Graphite Bio ( NASDAQ: GRPH ) gained ~10% Thursday morning, even as several Wall Street analysts quickly downgraded the gene editing company following its decision to discontinue research into sickle cell disease candidate GPH101.

Bank of America downgraded the biotech to Underperform from Neutral, noting that the decision was "not altogether surprising" as a Phase 1/2 study for the gene editing candidate previously led to an adverse event in one patient.

Despite the setback, the firm thinks Graphite ( GRPH ) has "the potential and resources to reinvent itself," given its plans to reduce 50% of the workforce and $283.5M cash available at the end of Q4 2022.

BofA trims the price target on GRPH to $2 from $3 per share after slashing the estimates for operating expenses due to the upcoming restructuring initiative and removing GPH101 from the firm's model.

Meanwhile, Cowen downgraded Graphite ( GRPH ) to Market Perform from Perform, noting that the candidate, also known as nulla-cel, was supposed to be the first test of the company's gene editing platform.

"Its demise raises questions about Graphite's foundational gene editing platform and the steps necessary to bring any candidate into clinical development," the analyst Phil Nadeau wrote.

Despite the deal-making potential, given the challenging market conditions, Nadeau argues that Graphite ( GRPH ) is unlikely to give long-term shareholder value except for the arbitrage between market cap and cash balance.

Cantor Fitzgerald also downgraded the stock to Neutral from Overweight following the announcement.

Seeking Alpha contributor Biologics with a Buy rating on Graphite ( GRPH ) argues that gene therapy involves upside potential as well as significant risks.

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