JPMorgan has moved off the sidelines on Allogene Therapeutics , a clinical-stage immuno-oncology company the bank believes could see positive catalysts. Analyst Brian Cheng upgraded the stock to overweight from neutral. Cheng also cut his price target nearly in half to $11 from $20, but the new forecast implies the stock will gain 60.3% over the next year. “Our upgrade is a valuation call driven by upside from the current level (at an EV of ~$500mn) as we see a healthy strategic shift brewing behind-the-scenes to place a heavier focus on the lead CD19 franchise,” he said in a note to clients. The CD19 franchise is centered around studies for relapsed or refractory non-Hodgkin lymphoma. He said they are worth watching, especially considering a trial is expected in the first half of the year. Cheng also said concern over weak sales could be over-blown if the company can move the timeline forward. Chen noted that Allogene’s current valuation justifies an upside call because of the fundamentals and catalysts coming. The stock gained 14% on Tuesday following the call and is up more than 24% this year. That marks a turn from 2022, when the stock lost 57.8%. The analyst noted that one concern about the company is the state of its BCMA franchise, which is focused on treatments for relapsed and refractory multiple myeloma. Based on discussions with management, Cheng said he believes the company is considering a strategic change and re-evaluating the manufacturing process. He said the company could improve sentiment among pessimists if the next step for BCMA yields positive results. Cheng said changes to BCMA would allow the company to remove a key overhang and then focus on its CD19 work. There will also be updates on a different project focused on renal cell carcinoma in the second half of the year that are also watching, he said. — CNBC’s Michael Bloom contributed to this report.
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