In November 2023, Korro Bio (NASDAQ:KRRO) circumnavigated the traditional IPO process by opting for a reverse merger with Frequency Therapeutics. This strategic move, coupled with a $170 million cash infusion from private investors, has triggered a surge in Korro Bio’s stock value. Now up over 400% over the past six months, the stock appears to be taking a bit of a breather. Though the RNA editing approach underpinning the company’s therapeutics seems promising, investors might consider waiting for more data and clinical progress before jumping in.
An RNA Editing Platform
Korro Bio is a biopharmaceutical company pioneering the development of genetic medicines by editing RNA.
Korro’s RNA editing platform, Oligonucleotide Promoted Editing of RNA (OPERA), utilizes an endogenous editing system called ADAR (Adenosine Deaminase Acting on RNA) to introduce precise edits to RNA via specifically engineered oligonucleotides.
The company’s first development candidate from this platform is KRRO-110, a potential treatment for Alpha-1 antitrypsin deficiency (AATD), a rare inherited disorder that causes lung and liver damage in children. The company reports that it is on track for regulatory filing for the First-in-Human study of KRRO-110 in Alpha-1 Antitrypsin Deficiency (AATD) patients, which is anticipated in the second half of 2024. This study is an essential precursor to clinical trials.
Financial Outlook
Korro recorded a net loss of $81.2 million for the year ending December 31, 2023, a notable increase from the previous year’s loss of $58.0 million. Despite this, Korro ended the year on a solid note with $166 million in cash and cash equivalents.
The company’s cash reserves project a runway extending into 2026. This financial stability is expected to allow for significant advancements, including key readouts for candidate KRRO-110 and the progression of additional pipeline candidates.
The cash burn rate for startup biotech companies is always a concern, and investors will want to monitor it, especially since the company is in the early stages of the treatment development process. At some point, Korro will likely need to seek additional funding, and further equity offerings or debt financing could dilute the shares of existing stockholders and potentially reduce the stock price.
Is KRRO a Buy, Hold, or Sell?
Although experiencing a meteoric rise since its late entry to the market last year, the shares have been trending down a bit over the past few days, though they still trade in the upper quartile of the 52-week price range of $14.00-$97.91. The pullback also hasn’t yet put a dent in the upward price momentum as measured by the 20-day (66.92) and 50-day (58.12) moving averages (though it’s worth keeping an eye on).
Analysts following the company are bullish on the stock. For instance, H.C. Wainwright analyst Mitchell Kapoor recently increased its price target from $100 to $115, maintaining a Buy rating for its shares. He noted that KRRO-110 should be well positioned given its RNA-based editing mechanism and a broader appetite for genomic medicines in AATD-associated lung disease treatments.
Korro Bio stock is rated a Strong Buy based on the ratings and 12-month price targets assigned in the past three months by the four Wall Street analysts following the company. The average price target for KRRO stock is $126.25, from a range of $90-$180. The average represents a 52.75% upside from current levels.
KRRO in Summary
With its RNA editing technology showing promise in preclinical trials, Korro Bio is on track for a regulatory filing for its First-in-Human study of KRRO-110. This should pave the way for critical readouts from the study for KRRO-110 and the progression of additional pipeline candidates.
As the company continues to innovate in genetic medicine, its investment story will be intriguing to watch. Still, as Korro navigates the early stages of what can be a lengthy treatment approval process, investors are advised to monitor its clinical trials and look for positive signs of progress before jumping on board.
