Morgan Stanley downgraded Aardvark Therapeutics Inc (AARD) to Underweight from Equalweight and lowered its price target to $3.00 from $7.00. The stock trades at $6.73, above the new target, though down 49% year-to-date.
The downgrade follows the FDA's decision to place ARD-101 on full clinical hold due to safety findings. The company voluntarily paused the Phase 3 HERO study in Prader-Willi syndrome earlier this year.
In a healthy volunteer study, reversible QRS prolongation was observed at double the HERO study dose. Two patients had over 25% delay. Similar findings occurred at 800 mg BID without dose escalation.
Preliminary analysis shows an exposure-response relationship, with higher doses linked to increased QRS prolongation risk. Lower doses may offer improved safety.
Aardvark is in discussions with the FDA to resolve the hold. The company plans to unblind data from the Phase 3 HERO study (68 patients) and open-label extension (19 patients). With negative free cash flow of $61.75 million, resolution timing is critical for investors.
