Shares of clinical-stage biopharmaceutical company Immunovant (NASDAQ:IMVT) are rising sharply on Wednesday morning and are up by 13.5% as of 11:55 a.m. EST, after jumping by as much as 15.4% earlier today. The drugmaker did not report any news today, at least not yet. What’s more, Immunovant is gaining ground despite a Wall Street analyst lowering his price target on the stock. What exactly is going on?
In early February, Immunovant reported that it had to halt two clinical trials for one of its pipeline candidates, IMVT-1401. The company made this decision after recording cases of elevated total cholesterol and LDL levels in patients treated with the experimental Thyroid Eye Disease treatment. High LDL levels, a form of cholesterol, can lead to severe health consequences such as heart attacks and strokes. Naturally, investors weren’t thrilled with this news and responded by selling-off Immunovant’s shares. In the past two weeks (or so), the company lost over half its value, with its market cap dropping to $1.8 billion as of this writing (down from more than $4 billion on Feb. 1).
After this steep decline, it seems plausible that institutional investors finally think the risk-reward profile of this biopharmaceutical company is attractive at its current levels and are bidding up its shares as a result. Meanwhile, Credit Suisse analyst Tiago Fauth maintained a neutral rating on the stock and lowered his price target to $26, down from $31. The analyst’s new price target still represents a more than 40% upside on Immunovant’s stock price.
Ultimately, the reasons why Immunovant’s stock is gaining ground today don’t matter as much as the company’s investment thesis. And as things stand, things don’t look great for the drugmaker. Immunovant is currently investigating the possible negative adverse reaction observed in patients taking IMVT-1401; no one knows how long this inquiry will last. Moreover, the company has no products on the market and no candidate even close to making it to the market. No matter the price of Immunovant, there are much better healthcare stocks to consider buying.
This article represents the opinion of the writer(s), who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.