Lyell shares down as BofA double downgrades to Sell

Investing.com -- Shares of Lyell Immunopharma Inc (NASDAQ:LYEL) fell around 4% Wednesday after Bank of America (NYSE:BAC) analysts double downgraded the stock from Buy to Underperform and slashed their price objective from $6 to $1.

The aggressive revision comes after the cell therapy company announced a reorganization of its pipeline, specifically discontinuing its solid tumor-directed CAR-T therapy, LYL797, due to safety concerns.

The downgrade reflects several other concerns, including the recent acquisition of ImmPACT Bio for its CD19/CD20 CAR-T therapy, IMPT-314. BofA views this acquisition as potentially complicating the story for the stock.

“We recognize ‘314’s value proposition, but beyond a lack of clinical/ commercial synergies, we think the program risks becoming a distraction with resources limited and competition growing,” analysts Jason Zemansky and Cameron Bozdog said in a note.

“Ultimately given Lyell's task at hand, restarting its program in solid tumors while expanding into hematology, it’s challenging for us to be constructive on the story. Until there’s evidence of progress, we see more attractive opportunities elsewhere,” they added.

BofA acknowledges the potential of IMPT-314 but notes the competitive landscape is challenging, with established players like Gilead (NASDAQ:GILD), Bristol-Myers Squibb Company (NYSE:BMY), and Novartis (LON:0QLR) (SIX:NOVN) already heavily invested in the space.

The analysis suggests that IMPT-314 contributes only marginally to the company's net present value (NPV), adding just $0.06 to the price objective.

Also, BofA points out that Lyell has terminated its Tumor Infiltrating Lymphocytes (TIL) program, discontinuing LYL845 after phase 1 results and halting work on pre-clinical assets.

The bank does not anticipate negative implications for Lyell's solid-tumor CAR-T therapies from this decision, citing different mechanisms of action. Despite the efficacy signals from LYL797, the firm sees developmental overlaps between the discontinued TIL and CAR-T programs as a strategic concern.