CytomX Therapeutics (NASDAQ: CTMX) drew attention a few days ago after its six-year-old, up-to-$1.68 billion cancer collaboration with Astellas Pharma (Tokyo: 4503) was terminated by the Japanese pharma giant, but the setback hardly registered with investors of the South San Francisco, CA, biotech.
Instead, what drew investors to CytomX stock on March 16 was its announcement of positive dose expansion data from a Phase I trial (NCT06265688) assessing varsetatug masetecan (varseta-M) in metastatic colorectal cancer (mCRC). Varseta-M achieved an overall response rate (ORR) of 32% and a median progression-free survival (mPFS) of 7.1 months at the high dose of 10 mg/kg.
“We continue to be highly encouraged by what we’re seeing, and we aim to develop varseta-M aggressively for the benefit of patients with CRC and over time, many other cancers,” Sean A. McCarthy, D.Phil., CytomX’s CEO and chairman, told analysts on the company’s quarterly earnings call on March 16.
CytomX basked in the glow of that news as its shares rocketed 75%, soaring from $4.68 to $8.20 early in trading before settling for a 44% gain and a closing price that day of $6.75. But the stock went downhill the following two days, as CytomX shares tumbled 19% to $5.45 Tuesday, then skidded another 19% Wednesday to $4.40.
The 35% nosedive was reversed on Thursday when CytomX shares rebounded 9% to $4.78. But the company gave up most of that gain Friday, through a 7% drop that sent the stock finishing the week at $4.45—down 5% from a week earlier.
Varseta-M is a Probody-developed masked, conditionally activated antibody–drug conjugate (ADC) armed with a topoisomerase-1 inhibitor payload (licensed from drug co-discoverer ImmunoGen, acquired by AbbVie for $10.1 billion) and directed toward epithelial cell adhesion molecule (EpCAM).
“We see a buying opportunity here with a rare ADC asset capable of generating an ~$1B+ opportunity in 3L+ (third- and subsequent line) mCRC alone, with potential ~5B+ as into 1/2L (first- and second-line), and possible expansion into a wide range of solid tumors with high EpCAM expression,” Jefferies equity analyst Roger Song, MD, predicted in a research note.
Examples of applicable solid tumors with high EpCAM expression, Song added, include gastric, ovarian, lung, and breast cancers. Within mCRC alone, Jefferies forecasts a combined ~$2 billion in peak-year adjusted U.S. sales.
Why the selloff?
But if varseta-M is such a potential blockbuster, why then did enough investors sell off their shares to send the stock plunging after the initial surge?
One explanation is CytomX pricing a $250 million public offering of stock and warrants a day after the positive data release, with net proceeds intended for the continued development of varseta-M and other pipeline programs.
CytomX offered 45,990,567 shares of its common stock at $5.30 per share, plus pre-funded warrants allowing selected investors to purchase 1,179,245 shares. The company also granted underwriters of the offering a 30-day option to purchase up to an additional 7,075,471 shares at the public offering price, less underwriting discounts and commissions.
Arguably, a more significant reason was the relatively small number of patients from which the positive data were collected—just 56 evaluable patients, of which 17 were dosed at 7.2 mg/kg, 20 at 8.6 mg/kg, and 19 at 10 mg/kg. At the two lower dosages, CytomX reported ORRs of 6% and 20%, respectively, significantly lower than the 32% the company focused on in its announcement. mPFS durations at the lower dosages were 5.5 months and 6.8 months, respectively, compared with 7.1 months at the high dose.
That 7.1-month figure reflected dose expansion patients who did not receive mandatory prophylaxis and who, according to the company, frequently required early dose interruptions or reductions.
As a result, Song wrote, “it is reasonable to believe” that the dose optimization patient cohort “has materially longer time-on-drug potential” as a result of a change to the prophylaxis regimen that included dosing patients at adjusted ideal body weight starting in Q4 2025 with updated prophylaxis anti-motility medication (loperamide or diphenoxylate/atropine) plus budesonide.
“We think mgmt. [management] clarity and further data disclosure could address investors’ debate/curiosity, mostly driven by smaller N [number of patients]/short follow-up, particularly at dose optimization,” Song commented.
Song’s concerns did not stop him from doubling his firm’s 12-month price target on CytomX shares, from $8 to $16. Jefferies was one of six firms that raised their price targets on CytomX stock following the positive data for Varseta-M. The other firms included:
- Wedbush Securities (Robert Driscoll)—Up 83% from $6 to $11, maintaining “Outperform” rating
- C. Wainwright (Mitchell Kapoor)—Up 70% from $10 to $17, maintaining “Buy” rating
- Barclays (Etzer Darout)—Up 60% from $10 to $16, maintaining “Overweight” rating
- Guggenheim Securities (Michael Schmidt)—Up 50% from $10 to $15, maintaining “Buy” rating
Anupam Rama, a managing director with J.P. Morgan focused on U.S. small- and mid-capitalization biotechnology equity research, not only raised the firm’s price target 71% from $7 to $12, but also upgraded its rating on CytomX stock from “Neutral” to “Overweight.”
Lilly stock rallies after HSBC downgrade
Eli Lilly (NYSE: LLY) shares went on a rollercoaster ride Wednesday after they were downgraded from “Hold” to “Reduce” (the equivalent of “Sell”) by analysts from HSBC (London: HSBA; Hong Kong: 5), who also cut their 12-month price target on the pharma giant’s stock nearly 21%, from $1,070 to $850.
A team of analysts led by Rajesh Kumar, a managing director and head of HSBC’s European life sciences and healthcare equity research, cited three reasons for issuing what to date is Lilly’s only sell-equivalent rating for its stock.
One is their skepticism about the projected size of the total addressable market (TAM) for obesity drugs—from the blockbusters Lilly is selling now to the new treatments the company plans to bring to market starting this year, such as orforglipron. The oral small molecule glucagon-like peptide-1 (GLP-1) receptor agonist is under FDA review with a Prescription Drug User Fee Act (PDUFA) target action date of April 10.
The HSBC analysts projected the TAM to rise by 2032 to only between $80 billion and $120 billion, 20% to 53% below the $150-plus billion estimated by a consensus of other analysts. HSBC based its pessimism on the looming specter of lower prices for obesity drugs resulting from both competition, especially with archrival Novo Nordisk (NASDAQ Copenhagen: NOVO-B), direct-to-consumer sales, and Trump administration efforts such as “most favored nation” (MFN) pricing.
“The price cuts in 2026 are a headwind. The company’s guidance implies that it can continue to defy gravity with volume growth,” Kumar and colleagues wrote.
Appearing on Canada’s BNN Bloomberg TV, Kumar acknowledged Lilly’s meteoric sales growth wrought by tirzepatide, the dual-action GLP-1 and glucose-dependent insulinotropic polypeptide (GIP) drug it markets in diabetes as Mounjaro® and in obesity as Zepbound®. Lilly finished 2025 with a near-doubling (95%) of net income from a year earlier, to $6.636 billion from $4.410 billion, on revenue that jumped 45% year-over-year, to $65.179 billion from $45.043 billion.
“Overexcited” market
“If you think about the company, their execution has been fantastic, and growth has been, I think, absolutely stunning,” Kumar said. “The problem you’ve got is, the market has gotten overexcited about the oral drug launch.”
Overexcited, Kumar argued, because oral drugs have generally shown a lower rate of medication adherence compared to injectables, as concluded by studies published in 2017 and in 2021, as well as a 2016 study in colorectal cancer patients that observed: “There should be an increased focus on improving adherence rates in patients receiving oral capecitabine.”
As a result, Kumar and his HSBC colleagues view 2026 sales forecasts for orfoglipron as too optimistic at between $1.1 billion and $1.3 billion, a range they say is anchored to the $1.5 billion in pre-launch inventories” that were “primarily related to orforglipron” as of December 31, 2025, according to the company’s Form 10-K annual report for 2025, filed February 12.
“Whilst the momentum in the launch might be positive, we think oral drug launch expectations for Lilly are too high,” the analysts wrote in their report.
But data from IMS showed a clear consumer preference for oral drugs. Oral Wegovy® (semaglutide), Novo Nordisk’s GLP-1 obesity drug, racked up 89,300 total prescriptions in its tenth week following launch on January 5, compared with 9,700 prescriptions written for injectable Wegovy, Jefferies equity analyst Akash Tewari reported in a research note.
Low-end forecast
Last year, Kumar and HSBC projected that orforglipron will generate close to $10 billion in peak-year sales, placing them at the low end of analysts’ sales forecasts.
While a consensus of analysts assembled through the Visible Alpha equities research platform has also offered a $10 billion peak-year sales forecast, David Risinger of Leerink Partners and three colleagues projected sales of $13.5 billion by 2030, while Jefferies’ Tewari has forecasted sales as high as $25 billion.
The third reason Kumar and colleagues gave for the downgrade is Lilly’s success in direct sales of some drugs through cash-based self-pay options—a success they said could be cyclical and thus short-lived.
“We think that the growth is largely driven by price rather than product differentiation. Rising working capital intensity at Lilly, headline price pressures, and rebate dynamics at both companies indicate to us that the pricing dynamics are likely to get worse,” the HSBC analysts commented.
Lilly shares dropped 7% from $930.35 to $905.11 early in Wednesday trading (9:58 a.m. ET) on news of HSBC’s downgrade. The decline was unusual for Lilly, which, like other top-tier pharmas, typically measures its day-by-day stock fluctuations in the low single digits.
But by the end of Wednesday trading, investors rallied behind Lilly enough to limit the damage to a 1.3% decline, closing at $918.05. Shares dipped a fraction (0.001%) on Thursday, closing at $917.50, and fell another 1% Friday, finishing the week at $906.70.
The downgrade marked the second time in a year that HSBC analysts lowered their rating on Lilly shares. Lilly was downgraded to “Reduce” in April 2025, with HSBC citing what it called an unattractive risk-reward profile based on what it called “too much optimism” in the company’s share price.
But by August, HSBC restored its rating to “Hold,” citing greater clarity on the commercial potential of orforglipron after Lilly released positive Phase III data for the drug.
Leaders and laggards
- Cingulate (NASDAQ: CING) shares nosedived 31% from $11.66 to $8.04 Wednesday after the developer of therapies based on its PTR drug delivery platform reported a larger-than-expected fourth quarter net loss of $6.273 million, vs. a $6.231 million net loss in Q4 2024. Cingulate finished 2025 with a net loss of $22.45 million, up from a net loss of $16.56 million a year earlier. A consensus of analysts projected a $4.8 million loss for Q4 and a $20.8 million loss for all of last year. Cingulate blamed its increased losses on higher general and administrative expenses plus interest on notes payable. The company cautioned that its cash and cash equivalents shrunk 11% to $11 million as of December 31, 2025, from $12.3 million a year earlier, only enough cash to satisfy current capital needs into the late fourth quarter. Despite the setback, Cingulate shares have soared 80% year-over-year, from $3.64 on March 18, 2025.
- Ovid Therapeutics (NASDAQ: OVID) shares climbed 34% over four trading days, immediately before and after reporting positive topline Phase I safety, tolerability, and pharmacokinetics findings from the 7 mg dose cohort of OV329, its next-generation GABA-aminotransferase (GABA-AT) inhibitor being developed to treat drug-resistant epilepsies. As a result, Ovid plans to advance OV329 into a Phase II trial in focal onset seizures and an open-label, proof-of-concept study. Ovid said it will add complementary development programs for OV329, expanding into tuberous sclerosis complex seizures and infantile spasms—an expansion to be funded through a private placement financing expected to generate $60 million in gross proceeds before deducting placement agent fees and offering expenses. Shares jumped from $1.95 Monday to $2.62 at the close of trading Friday, fueled by surges of 14% Wednesday (from $2.01 to $2.30) and 14% Friday (from $2.30 to $2.62).
