Alliance Global Partners downgraded Obalon Therapeutics (NASDAQ:OBLN) to “neutral” from “buy” and slashed its price target to 90 cents from $6.40 after the company moved to explore potential financial and strategic options. The stock closed at 70 cents on March 26.
Analyst Ben Haynor writes that his revised price target reflects his estimate of the company’s cash per share exiting the second quarter of 2020.
Obalon has developed an intragastric balloon technology for weight loss and recently adopted a retail strategy, with two clinics in California, which has been hit hard by the COVID-19 pandemic.
While treatments to patients who had begun care will continue, all treatments of new patients have been halted. The company believes it has enough inventory to provide balloons to patients who have already begun treatment, but it does not believe it will be able to ship new orders to international distributors or U.S. customers in the second quarter under the current California directives, which have caused a halt to its manufacturing operations.
“We have not assigned any value to the company’s technology, products, or other ‘going concern’ items, which we believe could have value to the right buyer in more normal times,” Mr. Haynor said.
“Given the current economic environment and the high levels of uncertainty regarding COVID-19, we think it unlikely a ‘strategic alternative’ [would be] willing to place significant value on these assets,” he added.