H.C. Wainwright analyst Robert Burns downgraded the rating on Springworks Therapeutics (SWTX – Research Report) to a Hold today, setting a price target of $47.00.
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Robert Burns has given his Hold rating due to a combination of factors surrounding the acquisition of SpringWorks Therapeutics by Merck KGaA. The acquisition agreement, set at a purchase price of $47 per share, represents a 26% premium over the company’s unaffected 20-day volume-weighted average price. This development prompted a downgrade from a previous Buy rating to Neutral, as the acquisition price reflects a modest premium and does not include contingent value rights, which could undervalue SpringWorks’ development-stage pipeline.
Furthermore, the valuation of SpringWorks was previously based on a discounted cash flow approach, considering high probabilities of launch for their approved drugs, OGSIVEO and GOMEKLI, but lower probabilities for other potential indications. The primary risk now lies in the acquisition not closing, although it is expected to proceed smoothly given the niche focus of SpringWorks in oncology, which should not present significant antitrust issues.
In another report released yesterday, Guggenheim also downgraded the stock to a Hold with a $47.00 price target.