Pharmaceutical giant Sanofi sent the stock of small biotech company Nurix plummeting. What will happen to the stock next?

Shares of the small biotech company Nurix Therapeutics plummeted nearly 40% at the close of trading on November 4, marking the worst single-day performance in the company’s history. The company reported that pharmaceutical giant Sanofi had abandoned further trials of a drug licensed from Nurix just a few months after they began. Against this backdrop, Wells Fargo analysts lowered their price target for the biotech’s shares by 20%.

Nurix shares fell 38% on the Nasdaq on November 4, to $15.95. This marked the largest intraday drop in the company's history, according to Stocktwits.

This came after the biotech company reported that pharmaceutical giant Sanofi had halted clinical trials of SAR448272, an experimental treatment for immune disorders. The French company obtained a license from Nurix for this drug, which is designed to inhibit STAT6—a protein involved in many inflammatory processes.

The companies have been collaborating since 2019; since then, Sanofi has paid the biotech company approximately $139 million for its participation in joint research and development of technologies for the targeted degradation of proteins involved in the development of certain diseases, according to a statement from Nurix. SAR448272 is one such compound.

In August, Sanofi began the first phase of its clinical trials, which triggered a $10 million interim payment to Nurix. Nurix’s press release did not specify the reasons for halting the program.

According to BioPharma Dive, Sanofi told analysts at Leerink Partners that new data from nonclinical studies did not provide a basis for continuing development of the drug for the treatment of eczema.

"This move is disappointing," wrote RBC Capital Markets analyst Brian Abrahams (as quoted by BioPharma Dive). "We believed that the initial preclinical properties looked quite similar to [Kymera's drug]," he noted. Kymera, like Nurix, is developing technologies for targeted protein degradation. Its competing drug is currently in Phase 1–2 trials.

Wells Fargo, an investment firm, also called the decision to halt development of the drug a negative surprise; it estimated the value of the discontinued program at approximately $400 million, according to StockTwits.

As a result, following the discontinuation of SAR448272 development, Nurix has fewer internal factors driving its stock price higher, according to Wells Fargo analysts. They lowered their price target for the biotech stock by 20% to $20, while maintaining a “hold” rating. This represents upside potential of more than 25% from the most recent closing price.

Needham analyst Gil Bloom continues to recommend buying the company’s stock with the same price target of $34 (more than double the current price), according to Investor’s Business Daily. The joint program with Sanofi was in a very early stage, and the investment bank did not have time to factor it into its model, the article notes.

In addition to its joint program with Sanofi, Nurix has a program with pharmaceutical giant Roche. This involves a treatment for chronic lymphocytic leukemia, which is currently in the final phase of clinical trials. This drug is the “key driver of value” for Nurix, and the setback with SAR448272 does not affect it, according to Jefferies analyst Roger Song.

Sanofi informed Leerink Partners that it still considers STAT6 to be “an important signaling pathway in immunology,” but that “this particular molecule will not be further developed.” Due to the program’s closure, Nurix has lost the opportunity to receive $453 million in milestone payments tied to the drug’s development, approval, and commercialization. Under other programs covered by the agreement with Sanofi, the biotech company could still receive up to $465 million in addition to the $139 million it has already received, according to IBD.

Biotech stocks have a total of 13 buy recommendations and only one hold recommendation. The average price target is $33.5, which is 110% higher than the most recent closing price.