Downgrades could start rolling in for the biotechs
The shares of drugmakers Incyte Corporation (NASDAQ:INCY) and Epizyme Inc (NASDAQ:EPZM) are getting crushed this morning, as the stocks react to Food and Drug Administration (FDA) buzz. What's more, analysts are cutting their price targets on INCY and EPZM stocks -- both of which could be vulnerable to additional bearish brokerage attention.
INCY Stock Eyes Worst Month in Years
An FDA panel last night recommended the regulatory body not approve a higher dose of baricitinib, an arthritis drug developed by Incyte and Eli Lilly (LLY). As such, INCY stock is down 4.6% to trade at $65 -- within striking distance of its two-year low of $61.30, touched on April 9.
It's been a brutal month, in particular, for Incyte shares, which have shed 22.2% already in April -- set for their worst month since January 2016. The equity gapped lower to start the month, after the company ended the study of its cancer drug, epacadostat, used in combination with Merck's (MRK) Keytruda.
In the wake of the FDA panel recommendation, SunTrust Robinson cut its price target on INCY shares to $75 from $80. There could be more price-target reductions on the horizon for the drug stock, too, as the average 12-month price target of $81.31 represents a premium of more than 25% to INCY's price. Meanwhile, 13 out of 18 analysts maintain "buy" or better opinions on the shares, leaving the security vulnerable to potential downgrades.
EPZM Stock Plummets On FDA Hold
Meanwhile, the FDA put a partial clinical hold on new enrollments for Epizyme's trial of key cancer drug tazemetostat, after a pediatric patient developed secondary T-cell lymphoma. EPZM stock is among the worst of the Nasdaq this morning, down 14.1% at $13.15. The shares are now testing a trendline that's connected a series of lower highs since late 2016, and are set for their lowest close of 2018.
In the wake of the halted tazemetostat trial, Wedbush and SunTrust Robinson both cut their price targets on Epizyme shares to $20. Again, additional price-target cuts could be coming for EPZM, as the consensus of $24.78 represents a whopping 87% premium to the equity's current price. In the same vein, eight of nine analysts following the drug stock maintain "strong buy" or "buy" opinions.