Foghorn extends losses as TD Cowen cuts on Lilly exit

Wedbush recently lowered Foghorn Therapeutics' stock rating to Neutral from Outperform and reduced its price target to $2.00 per share from $10.00. The company's stock is currently trading at $2.92, down 16.6% over the past week and 46% year-to-date. This downgrade comes after Foghorn Therapeutics and Eli Lilly decided not to advance FHD-909, a SMARCA2 degrader, based on Phase 1 dose escalation data.

Despite showing on-target SMARCA2 engagement with a favorable safety profile, the SMARCA2/4 synthetic lethality biology failed to demonstrate the required level of clinical efficacy for dose expansion. In response to these setbacks, Foghorn Therapeutics is implementing a workforce reduction of around 40% and a broader operating realignment.

The revised price target reflects the company's substantial cash reserves, which now extend its cash runway to the second half of 2029 instead of the initially projected first half of 2028. With a current ratio of 3.36, Foghorn Therapeutics maintains a strong liquidity position and holds more cash than debt on its balance sheet.

The stock appears undervalued, as noted by InvestingPro analysis, and currently ranks among the most undervalued stocks. Despite the recent developments, some analysts like Guggenheim and Stifel maintained a Buy rating, while others, such as TD Cowen and Citizens, downgraded the stock to Hold or Market Perform due to the halted advancement of FHD-909 and disappointing efficacy signals in solid tumor studies.

Despite these challenges, Citizens has retained its Market Outperform rating with a $9.00 price target, anticipating future results from Foghorn's ongoing research. This shift in Foghorn Therapeutics' strategic focus as the company concentrates on its wholly-owned pipeline is evident in the recent developments.