Analysts Weigh in on Two Collapsing Biotech Stocks: Threshold Pharmaceuticals, Inc. (THLD) and Alcobra Ltd (ADHD)

The biotech world is experiencing volatility in the midst of a drug development discontinuation for Threshold Pharmaceuticals, Inc. (NASDAQ:THLD) and word from the FDA to place a drug program on full clinical hold for Alcobra Ltd (NASDAQ:ADHD). Analysts are prompted to chime in on these falling stocks, maintaining bullish forecasts. Let’s take a closer look:

Threshold Pharmaceuticals, Inc. 

After Threshold announced negative interim results with tarloxotinib, a hypoxia induced irreversible (covalent) epidermal growth factor receptor (EGRF) inhibitor, in two Phase II trials, shares are subsequently plunging nearly 56%. Because tarloxotinib failed to meet prespecified efficacy thresholds, all future development on the pipeline drug has been halted.

Additionally, the biotech firm announced to retain capital, its workforce will be reduced, instead opting to shift focus to regulatory discussions in Japan for its pipeline pancreatic cancer drug evofosfamide.

Despite the adverse results for tarloxotinib and THLD reduction in workforce, William Blair analyst John Sonnier reiterates an Outperform rating on shares of THLD without listing a price target.

Sonnier explains, “We believe the potential regulatory path forward with evofosfamide in pancreatic cancer in Japan could transform the company’s valuation and P&L statement. With $33.6 million in cash at the end of the second quarter, we believe the capital should be sufficient to bridge the company to the next material inflection point.”

Furthermore, the analyst understands the biotech firm’s choice to terminate the development on the pipeline drug, asserting, “We agree with management’s decision to discontinue development of tarloxotinib due to the lack of a clear efficacy signal from the Phase II programs.”

In THLD’s favor, Sonnier sees promise as the firm pursues Investigational New Drug-enabling studies with TH-3424, a novel AKR1C3 activated prodrug designed to treat cancer. The drug has already indicated to be considerably upregulated in particular kinds of tumors, including hepatocellular carcinoma.

“Preclinical data supports the ability of TH-3424 to effectively kill cancer cells with upregulated AKR1C3, and we look forward to future updates with the compound,” the analyst concludes.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst John Sonnier is ranked #438 out of 4,181 analysts. Sonnier has a 51% success rate and realizes 13.2% in his annual returns. When recommending THLD, Sonnier gains 12.3% in average profits on the stock.

Alcobra Ltd

Alcobra shares dipped nearly 46% yesterday after Wednesday’s news came to light of the FDA verbally placing a clinical hold on its MEASURE program evaluating the firm’s pipeline Metadoxine Extended Release (MDX) drug designed to treat ADHD in adults. The full clinical hold includes MDX programs for both ADHD as well as Fragile X Syndrome on back of the FDA pointing to “adverse neurological findings in preclinical studies.” Written confirmation is anticipated to follow within the week.

Jefferies analyst Biren Amin understands this is a “clear negative for ADHD shares,” but remains positive, awaiting the written confirmation to better formulate an opinion on the implications this hold will mean for the biotech firm. As such, the analyst reiterates a Buy rating on ADHD, while cutting the price target from $9 to $6.

ADHD management contends the hold could be attributed to neurotox exhibited in a preclinical rat 6-month study where neurotox findings arose from very high doses. Though the agency received this data in March of 2016, Amin believes, “It seems the agency just only now got around to taking action and maybe due in part to a new non-clinical team member joining the FDA recently.”

Amin explains, “We await additional information which should be available next week to assess the likelihood and timing for removing the clinical hold.” Originally, a data readout for MEASURE was expected by first-quarter of 2017, but as a result of this hold, it is highly likely the firm will confront a delay.

Taking this into account, Amin comments, “We have delayed our launch of MDX by two years to conservatively model the impact this clinical hold could have on MDX’s development. We delay launch expenses and extend the time and R&D expense for development of MDX.”

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Biren Amin is ranked #266 out of 4,200 analysts. Amin has a 57% success rate and garners 10.1% in his yearly returns. However, when recommending ADHD, Amin faces a loss of 9.9% in average profits on the stock.

TipRanks analytics exhibit ADHD as a Buy. Based on 6 analysts polled in the last 3 months, 3 rate a Buy on ADHD, 2 maintain a Hold, while 1 issues a Sell. The consensus price target stands at $8.88, marking a nearly 254% upside from where the stock is currently trading.

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