On Friday, Stifel, a financial services firm, adjusted its stance on ALX Oncology shares, downgrading the biopharmaceutical company from a "Buy" to a "Hold" rating. The firm also increased the price target for ALX Oncology (NASDAQ:ALXO) to $14.00, up from the previous target of $10.00. The revision comes as the analyst assesses the market potential and development trajectory of ALX Oncology's evorpacept, a CD47 blocker currently in development.
The analyst from Stifel noted that the current valuation of ALX Oncology reflects the market opportunity for evorpacept in treating HER2+ gastric cancer. A pivotal study for this indication is expected to commence in the fourth quarter of 2024, contingent on positive data replication expected around June or July.
Despite the upcoming initiation of the pivotal study, the analyst expressed a conservative outlook, citing the market for this specific cancer treatment as potentially less than $100 million.
The firm acknowledged that the downgrade occurred just before ALX Oncology is set to experience a series of early-stage data catalysts. These catalysts will test the "optionality" of CD47 in various treatments, including blood cancers and combination therapies with antibody-drug conjugates (ADCs) and checkpoint inhibitors.
However, the analyst expressed reservations about the evidence supporting positive outcomes, particularly in head and neck squamous cell carcinoma (HNSCC), and questioned the feasibility of development pathways for combination therapies.
Stifel also considered the broader context of strategic interest in CD47 blockers, pointing out the challenges posed by significant value declines in historical deals involving CD47 assets and the abundance of CD47/SIRPα assets already present in pharmaceutical pipelines.
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