NewLink Genetics' Potential Catalysts Not Enough To Justify A Bullish Stance, Baird Says In Downgrade

NewLink Genetics Corp (NASDAQ: NLNK) said Friday it will review the clinical programs for its indoximod therapy after rival Incyte Corporation (NASDAQ: INCY) announced disappointing results from a study of the similar therapy epacadostat. 

The Analyst

Baird Equity Research's Michael Ulz downgraded NewLink Genetics' stock rating from Outperform to Neutral with a price target slashed from $22 to $5.

The Thesis

NewLink's indoximod has a different mechanism than Incyte's epacadostat, but that doesn't negate the uncertainty and changes ahead for NewLink, Ulz said in the downgrade note.

NewLink's own company-specific catalysts aren't compelling enough to offset these concerns, the analyst said. They are:

• Phase 1 data for indoximod in pediatric patients with malignant brain tumors.
• Phase 2 data from indoximod studies in combination with PD-1 in melanoma and gem/Abraxane.

The analyst's new $5 price target is based on the following:

• A sum-of-the-parts net present value analysis with a "modest" value assigned to indoximod.
• A standard 10-percent weighted average cost of capital for development-stage biotechs.
• The company's net cash.

Price Action

Shares of NewLink Genetics were trading lower by 6.43 percent at the time of publication Monday. 

Related Links:

Analyst: NewLink Shares Have Doubled This Month And There's Still Room For More Upside

Cantor Fitzgerald Double Downgrades NewLink Genetics After Incyte's Disappointing Trial