Leerink cuts Intra-Cellular Therapies to MP

Leerink downgraded Intra-Cellular Therapies (NASDAQ:ITCI) to “market perform” from “outperform” and slashed its price target to $10 from $29, following a corporate update highlighting an unusual preclinical safety concern for lumateperone (ITI-007), its atypical antipsychotic for the treatment of schizophrenia. The stock closed at $10.49 on May 1.

“Even though the FDA confirmed that the results of the failed Phase 3 ITI-007-302 study do not preclude the company from submitting an NDA, the safety concern and request for additional information over findings observed in nonclinical animal toxicology studies give us pause on multiple fronts, including the timing and overall quality of disclosure,” writes analyst Seamus Fernandez.

“Best case is that they address the toxicology concern and submit a NDA by mid-2018. But if they do not satisfy the FDA's concerns, we believe lumateperone's main value proposition – its tolerability and safety profile – would be in question,” he added.

Mr. Fernandez said that while there is a positive case to be made to own the stock, which is trading near cash at about $10 a share, “we could not get comfortable on if and how this issue would be fully resolved.” He also lowered the probability of success of the schizophrenia program to 25% from 50%.