HCW cuts Pulse Biosciences to neutral; PT to $6 from $26

Pulse Biosciences

H.C. Wainwright downgraded Pulse Biosciences (NASDAQ:PLSE) to “neutral” from “buy” and slashed its price target to $6 from $26 after the FDA issued a “not substantially equivalent” (NSE) letter in response to the company’s 510(k) application for its CellFX System. The stock closed at $12.19 on Feb. 13.

According to the company, the FDA has indicated that based on the data provided, CellFX is not substantially equivalent to the predicate device, writes analyst Swayampakula Ramakanth. “Since CellFX is Pulse’s only disclosed product, this rejection marks a substantial setback to the company’s development and commercialization plans,” he added.

Pulse has developed a Nano-Pulse Stimulation (NPS) technology to treat a variety of applications. NPS technology delivers nano-second pulses of electrical energy to non-thermally clear cells while sparing adjacent non-cellular tissue. The company was initially targeting clearance of common and difficult-to-treat skin lesions.

“While we fully expect the company to continue the development of CellFX with new clinical studies in seborrheic keratosis and sebaceous hyperplasia, as well as a new regulatory filing in the future, we note that this nonetheless is likely to delay the commercial launch of CellFX by at least 24 months,” Mr. Ramakanth said.

“While we continue to believe in the clinical benefit of CellFX, we note that the regulatory risk for the program has significantly increased in light of the NSE letter,” he added.

In addition, with the time needed to generate the new clinical data, “we do not believe there is a major catalyst in sight in the next 12-to-18 months, and we expect the stock to remain range bound until the studies are complete,” Mr. Ramakanth said.