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Forte Biosciences: No Forte Left to Represent the Bull Case
Stock Analysis & Ideas

Forte Biosciences: No Forte Left to Represent the Bull Case

While biotech companies represent an opportunity for some unseemly gains should a drug gain the regulators’ approval or excel during clinical trials, the risks work the other way too. This is something Forte Biosciences (FBRX) investors know all too well following the recent collapse.

Forte shares lost a humongous 86% of their value this month after the company’s atopic dermatitis candidate FB-401 failed to meet the primary endpoint in phase 2 testing.

Specifically, while 58% of participants who took FB-401 achieved EASI-50 (the proportion of patients with a 50% or more improvement as determined by the Eczema Area and Severity Index), the figure was lower than that attained in the placebo group, which notched 60%. Secondary endpoints of EASI-90 and Investigator Global Assessment (IGA) also displayed no statistically meaningful differences between FB-401 and the placebo. As a result, Forte has decided to abandon the program’s development. Making matters worse, FB-401 was the company’s sole drug candidate, which leaves investors – or those still hanging around – in the lurch.

“Absent any other data available,” says Chardan’s Keay Nakae, “It is difficult to formulate an explanation for what went wrong, or why the placebo response was so high.” The results contrast sharply with the promising data generated in the single-arm phase I/IIa study – 90% of patients achieved EASI-50 – and Nakae concedes he had expected much better.

“Nothing for us to be proud of here as we were optimistic of a positive result in the phase IIb based on the phase 1/IIa results,” said the 5-star analyst. “As FB-401 was the company’s only asset, we expect Management to quickly take the necessary steps to reduce cash burn. We believe that options going forward include utilizing the remaining cash to acquire a new early stage asset to develop, or becoming a shell that another private company can reverse into.”

The company has said it will continue to sift through the data and over the coming months will provide an update on it plans going forward.

In the meantime, Nakae downgraded FBRX from Buy to Sell, while slashing the price target all the way from $104 to a measly $4. (To watch Nakae’s track record, click here)

The Street’s average target is an even more pessimistic $3.5, indicating a 15% decline from the current share price. 4 other recent reviews are ambivalent, all suggesting to Hold, and ultimately coalescing to a Hold consensus rating. (See FBRX stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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