Shares of Adagio Therapeutics (ADGI) are under pressure on Tuesday after the company reported a reduction in in-vitro neutralization activity of its ADG20 against the COVID-19 variant omicron. Following the update, Morgan Stanley analyst Matthew Harrison downgraded the stock to Equal Weight, calling ADG20's 300-fold reduction in neutralization against omicron a "surprising" result that will likely limit the utility of ADG20 and ADG1.
ADG20 UPDATE: Adagio Therapeutics provided an update following external in vitro analyses to evaluate neutralizing activity of ADG20 against the omicron SARS-CoV-2 variant. The in vitro data generated through both authentic and pseudovirus testing of the omicron variant show a greater than 300-fold reduction in neutralizing activity of ADG20 against omicron, the company said. Additional analyses are ongoing, and the company plans to engage with regulatory and government agencies to assess the role ADG20 can play for the prevention and treatment of COVID-19, particularly as the industry's understanding of the epidemiology and impact of omicron and potential new variants develops. ADG20 is an investigational monoclonal antibody product candidate designed to provide broad and potent neutralizing activity against SARS-CoV-2, including variants of concern, for the prevention and treatment of COVID-19 with potential duration of protection for up to one year with a single injection.
'SURPRISING' NEUTRALIZATION CUT: Morgan Stanley analyst Matthew Harrison downgraded Adagio Therapeutics to Equal Weight from Overweight with a price target of $11, down from $49. ADG20 had a 300-fold reduction in neutralization against omicron, a "surprising" result that will likely limit the utility of ADG20 and ADG10, Harrison told investors in a research note. The analyst also noted that ADG20 has broad activity against other variants but given his expectation of omicron becoming "dominant quickly," he believes "the uncertainty will limit the drugs utility." Harrison lowered his probably of success from 70% to 50% given the news.
The downgrade comes only two weeks after Harrison's upgrade of Adagio shares to a Buy-equivalent rating on potential against the new COVID variant omicron. On November 29, the analyst upgraded Adagio to Overweight from Equal Weight with a price target of $49, up from $33, noting that evidence suggested that the omicron variant could have higher transmissibility than previous variants and was likely to become a new dominant variant in the short-term. The high transmissibility, once confirmed, should increase demand for antibodies which can neutralize the variant, but current leading antibodies, including those from Eli Lilly (LLY) and Regeneron (REGN), are compromised by omicron, said Harrison at that time. However, the analyst had previously believed that Adagio's ADG20 remained "highly effective" at neutralizing omicron and that it possessed other "preferable characteristics," including coverage of multiple variants.
PRICE ACTION: In Tuesday morning trading, shares of Adagio have dropped over 78% to $7.33.
Adagio Therapeutics
-26.77 (-78.16%)
Eli Lilly
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Regeneron
+9.08 (+1.37%)