On Wednesday, RBC Capital maintained its Outperform rating and $31.00 price target for Neumora Therapeutics (NASDAQ:NMRA), despite a significant drop in the company's share price. The stock experienced a roughly 17% decline, contrasting with a 1% gain in the XBI biotech index. The fall coincides with the expiration of lock-up agreements from Neumora's initial public offering in September 2023.
RBC Capital sees the current dip in Neumora's shares as an opportunity for investors. The firm's confidence is supported by the potential of Neumora's lead drug, navacaprant, which is being developed for major depressive disorder (MDD).
RBC Capital believes that existing data on navacaprant, along with data from other kappa opioid receptor (KOR) antagonist drugs, suggest promising efficacy and safety results expected later this year from Neumora and Johnson & Johnson (NYSE:JNJ).
In addition to navacaprant, RBC Capital highlighted the potential of Neumora's early-stage drug, referred to as '266. Expected phase I data by mid-year could increase interest in what RBC Capital views as a competitive asset in the muscarinic agonist space. The firm draws a parallel to emraclidine from Cerevel Therapeutics, which was recently acquired for $9 billion.
The lock-up expiration may have previously weighed on Neumora's stock price, according to RBC Capital. With the lock-up period now ended, the firm anticipates the stock could rally in anticipation of upcoming catalysts. RBC Capital estimates the fair value of Neumora's stock at $31 per share, which is 110% higher than its current trading price.
RBC Capital concludes that the current weakness in Neumora's stock presents a more attractive entry point for investors, given the expected second half of 2024 catalysts related to navacaprant in MDD and the company's broader pipeline.
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