Morgan Stanley downgrades Aardvark Therapeutics stock rating on trial pause

Morgan Stanley downgraded Aardvark Therapeutics Inc (NASDAQ:AARD) to Equalweight from Overweight and cut its price target to $7.00 from $29.00 on February 3, 2026, following the biotech company's announcement to voluntarily pause its Phase 3 HERO trial of ARD-101 in Prader-Willi syndrome due to reversible cardiac observations found during safety monitoring in a healthy volunteer study. The downgrade reflects growing uncertainty surrounding the path forward for ARD-101, a treatment aimed at addressing hyperphagia in patients with Prader-Willi Syndrome. Aardvark, which currently has a market capitalization of $272 million, saw its stock trading at $12.49, representing a significant 72% decline from its 52-week high, as investors reacted to the unexpected development in the clinical trial process. The cardiac observations that prompted the trial pause were noted in a healthy volunteer dose cohort above the target therapeutic dose used in the Prader-Willi syndrome study, and importantly, these observations were not characterized as serious adverse events. According to Aardvark, these cardiac effects were not observed in any ongoing or prior clinical trials at the targeted therapeutic doses, and the FDA has not placed the HERO study on clinical hold. In response to the situation, the company plans to meet with regulatory authorities in the near future and provide a comprehensive update on the program in the second quarter of 2026. Consequently, Aardvark has revised its timeline, no longer expecting topline data from the Phase 3 HERO study in the third quarter of 2026 as previously anticipated. The mixed reactions from Wall Street continued as other financial institutions weighed in on Aardvark's situation. RBC Capital followed Morgan Stanley's lead by downgrading Aardvark Therapeutics' stock rating to Sector Perform from Outperform and reducing its price target to $6.00 from $18.00. However, some analysts remained optimistic, with B.Riley initiating coverage on the stock with a Buy rating and a price target of $32.00, highlighting the potential of ARD-101 in addressing the challenges faced by Prader-Willi Syndrome patients. Raymond James also reiterated its Strong Buy rating with a $47.00 price target, emphasizing the therapeutic potential of the drug. Amid these developments, Aardvark received Institutional Review Board approval to lower the minimum age requirement for its trial from 10 to 7 years old, seeking to include younger children affected by PWS in future studies.