NLTX - Neoleukin cut to Hold at Stifel on plans to drop lead asset

Nanocap biotech Neoleukin Therapeutics ( NASDAQ: NLTX ) shed ~19% pre-market Tuesday after the company announced plans to discontinue the development of its lead asset NL-201 prompting Stifel to downgrade the stock to Hold from Buy.

Neoleukin ( NLTX ) made the disclosure on Monday with its Q3 2022 results, in which the management said that strategic reasons led to the decision.

"We will be using the information we have learned from the development of NL-201 and advances in protein design to build the next generation of de novo protein therapeutics," Chief Executive Jonathan Drachman remarked.

While the company plans to share pre-clinical data for a new therapeutic candidate at ASH 2022, Stifel analysts led by Benjamin Burnett have yet to include that in their model as details on that development strategy remain unknown.

The team also points to Neoleukin's ( NLTX ) decision to cut headcount by ~40%, which could extend its cash runway to H2 2025. And they slashed the price target on the stock to $0.90 from $14.00 per share based on estimated per share cash in Q3 2023, when clarity for early-stage assets is expected.

Wall Street has remained bullish on Neoleukin ( NLTX ) stock, with an average rating of Buy from analysts, while Seeking Alpha's Quant System, which consistently beats the market, rated NLTX as a Hold.

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