GRCE Stock On Track For Worst Week In 5.5 Years — What’s Driving The Selloff?

• Grace was seeking FDA approval for GTx-104 in the treatment of patients with aneurysmal subarachnoid hemorrhage.
• However, the FDA issued a letter to it on Thursday, citing issues in the Chemistry, Manufacturing, and Controls (CMC) and Non-Clinical sections of its application.
• Analysts from Craig-Hallum and TD Cowen slashed price targets on the stock on Friday following the FDA decision.

Shares of Grace Therapeutics (GRCE) are on track for their worst week since Sept. 2020, after the U.S. Food and Drug Administration refused to approve its experimental drug for the treatment of a severe form of acute brain injury, sparking price target cuts.

Shares of the company are down 49% this week, if losses hold.

FDA Rejection

Grace was seeking FDA approval for GTx-104 in the treatment of patients with aneurysmal subarachnoid hemorrhage (aSAH), or bleeding over the surface of the brain in the space between the brain and the skull as a result of a ruptured brain aneurysm.

However, the FDA issued a letter to it on Thursday, citing issues in the Chemistry, Manufacturing, and Controls (CMC) and Non-Clinical sections of its application. The agency highlighted leachables data for product packaging, non-clinical product toxicology risk assessments, and product manufacturing deficiencies at the company’s contract manufacturing organization, it said.

Wall Street Weighs In

Craig-Hallum lowered the firm's price target on Grace Therapeutics to $4 from $11 and kept a ‘Buy’ rating on the shares following the announcement. The firm believes Grace has enough runway to address the deficiencies highlighted by the FDA and an application resubmission, though shares are unlikely to move higher until further visibility is provided, it said.

TD Cowen analyst Stacy Ku also lowered the firm's price target on Grace Therapeutics to $8 from $12 and kept a ‘Buy’ rating on the shares. The firm noted that GTx-104's rejection is related to CMC, with no requests for additional clinical data. Management will seek a meeting with the FDA, which should clarify resubmission timelines, the analyst said. The firm assumes a roughly 12-month delay, with potential for faster resolution.

Grace Chimes In

“We are confident in the robust data package supporting our NDA (application) submission, and that the CMC issues identified by the FDA can be successfully addressed in our resubmission,” CEO Prashant Kohli said on Thursday following the receipt of the FDA letter.

How Did Retail Traders React?

On Stocktwits, retail sentiment around GRCE stock stayed within ‘bullish’ territory over the past 24 hours, while message volume remained at ‘extremely high’ levels.

A Stocktwits user highlighted that the issues cited by the FDA are fixable and the stock will bounce back up.

Another user dismissed the rejection and instead highlighted possible risks of dilution from capital raising initiatives.

GRCE stock is down 8% over the past 12 months. 

Read More: CMPS On Track For Best Week Ever On FDA Push For Psychedelics

For updates and corrections, email newsroom[at]stocktwits[dot]com.