Regulus Therapeutics shares surged after Novartis announced a $1.7 billion acquisition, but analysts downgraded the stock citing limited upside. Retail sentiment remained bullish, with speculation of a higher bid or FDA-driven gains.

Wall Street analysts downgraded Regulus Therapeutics on Wednesday following its acquisition by Swiss drugmaker Novartis, citing limited room for upside after the deal valued Regulus at up to $1.7 billion.

JonesResearch cut its rating to ‘Hold’ from ‘Buy’ and lowered its price target to $7 from $8, calling the offer “highly favorable” in light of Regulus’ upcoming Phase 3 trial financing needs, according to The Fly.

Canaccord Genuity also reportedly downgraded the stock to ‘Hold,’ slashing its target to $11 from $28. 

Meanwhile, Wells Fargo reportedly cut its rating on Regulus to ‘Equal Weight’ from ‘Overweight,’ raising its target to $9 from $6 to reflect the contingent value right (CVR) component. Leerink Partners and Oppenheimer issued similar downgrades.

Under the agreement, Regulus shareholders will receive $7 per share in cash and an additional $7 via a CVR, contingent on U.S. regulatory approval of its lead candidate, farabursen. 

The upfront payment represents a 108% premium to Regulus’ April 29 closing price and a 274% premium to its 60-day volume-weighted average. 

The transaction, unanimously approved by both companies’ boards, is expected to close in the second half of 2025, pending regulatory approvals and majority shareholder tender.

Shares of Regulus surged to their highest levels since 2021 following the news and are up 6.4% year-to-date, while Novartis has gained 4.8%, both outperforming broader markets.

The Dow is down 4.1%, the S&P 500 has lost 5.1%, and the Nasdaq is off 1.6% over the same period.

On Stocktwits, 24-hour message volume for Regulus jumped by 2,863% amid “extremely bullish” sentiment.

One user congratulated Regulus shareholders, particularly recent buyers, and suggested that the growing interest in rare diseases could make companies like Protalix BioTherapeutics, Zevra Therapeutics, and Esperion Therapeutics potential targets going forward.

Another Stocktwits user speculated that Regulus shares could double from current levels, fueled by FDA-related optimism and the potential for a competing bid to top Novartis' offer.

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