On Monday, Citi adjusted its outlook on Ovid Therapeutics Inc (NASDAQ:OVID), slashing the stock price target to $1.20 from the previous $3.50 while maintaining a Neutral rating on the stock. The revision follows the recent failure of Ovid's Phase 3 epilepsy trials involving the drug soticlestat. As a result of this setback, Citi has removed soticlestat from its valuation model.
The new price target is derived from risk-adjusted discounted future cash flows for another of Ovid's assets, OV329. This calculation brings the company's valuation in line with its current cash reserves, which are estimated to be around $90 million. Despite the downgrade, Citi remains neutral on Ovid's stock, suggesting that there may be potential to revisit the rating based on forthcoming data from several of the company's programs.
Among the events that could prompt a re-evaluation of Ovid's stock are the expected topline Phase 1 multiple ascending dose (MAD) safety data for OV888, a ROCK2 inhibitor in Cardiovascular Metabolism (CVM), which is anticipated within the next few weeks. Although this program is not currently factored into the valuation, positive safety data, particularly the absence of serious adverse events (SAEs), could lead to a more optimistic view.
Moreover, Citi is looking forward to pre-clinical data expected by the end of 2024, which will compare the ocular safety of vigabatrin with OV329. If the data demonstrates that OV329 does not accumulate in the retinal tissue, Citi may consider increasing the probability of success (PoS) for OV329 above the current 30%.
Furthermore, biomarker data involving transcranial magnetic stimulation (TMS) and magnetic resonance spectroscopy (MRS) for oral OV329, also expected by the end of 2024, could lead to a reassessment of the asset's long-term PoS.
In other recent news, Ovid Therapeutics Inc. reported mixed results from Phase 3 clinical trials for soticlestat, a treatment for rare forms of epilepsy. Despite the trials narrowly missing their primary goals, the drug maintained a consistent safety and tolerability profile. In the financial sphere, Ovid reported earnings per share (EPS) of ($0.17), surpassing the anticipated ($0.24) and ($0.22) projected by Oppenheimer and consensus estimates, respectively.
Analyst firms BTIG and Oppenheimer maintained their Buy and Outperform ratings for Ovid Therapeutics, respectively. B.Riley also retained a Buy rating for the company, despite reducing its price target to $3.00 from $9.00 due to Ovid's limited cash reserves and the exclusion of anticipated revenue from soticlestat milestones and royalties in their valuation.
The firm's continued Buy rating suggests a belief in Ovid's potential, particularly with the company's upcoming catalysts for its drug candidates OV329 and OV888. These developments are recent and provide an insight into Ovid's performance and future prospects.
InvestingPro Insights
As Ovid Therapeutics Inc (NASDAQ:OVID) navigates a challenging phase following the failure of its Phase 3 epilepsy trials, the company's financial health and stock performance metrics offer a mixed picture. According to InvestingPro data, Ovid has a market capitalization of approximately $72.08 million, indicating a relatively small size within the biotech sector. Despite the recent setbacks, the company has managed a strong 20.96% return over the last three months, reflecting a degree of investor optimism or recovery in the stock price.
Notably, Ovid holds more cash than debt on its balance sheet, providing some financial stability in the short term. This is a critical factor as the company is quickly burning through cash, which is highlighted by the InvestingPro Tips. Furthermore, the company's liquid assets exceed its short-term obligations, which could provide some cushion against operational headwinds.
Still, the company is not expected to be profitable this year, and analysts anticipate a sales decline, suggesting that near-term revenue growth may be challenging. Ovid does not pay a dividend to shareholders, which may influence the investment decisions of income-focused investors.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available that provide further insights into Ovid's financial health and future prospects. By using the coupon code PRONEWS24, you can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable tips and make more informed investment decisions.
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