Departure Of TrovaGene CCO Creates Near-Term Risks; Cantor Downgrades Stock

Shares of TrovaGene Inc (NASDAQ: TROV) plunged 24 percent after Cantor Fitzgerald downgraded the company to Hold from Buy, saying that although the new CEO hire is positive, the departure of CCO is a "significant negative" for the company.

TrovaGene, a developer of cell-free molecular diagnostics, announced the appointment of William "Bill" Welch as CEO, effective immediately. However, the company announced the departure of Chief Commercial Officer Matthew Posard.

Related Link: TrovaGene Gains 3% On Favorable Mention In Medical Journal

The Significance Of The Management Changes

Cantor Fitzgerald analyst Bryan Brokmeier noted that the departure of Posard creates a near-term risk for the continued commercialization of TrovaGene's diagnostic assays on potential departure of other senior members of TrovaGene's commercialization team that joined the company with Posard from Illumina, Inc. (NASDAQ: ILMN).

However, the analyst believes Welch's commercialization experience should enable him to fill the loss of Posard. Welch, a former CEO of Sequenom, Inc. (NASDAQ: SQNM), also has experience as a senior vice president and chief commercial officer at Monogram Biosciences, a bioscience laboratory services company.

"Mr. Welch led the commercialization of SQNM's MaterniT21, which we view as one of the most successful diagnostic launches in history (though later ran into trouble as new competitors entered the market with less expensive tests)," Brokmeier wrote.

Brokmeier added that since SQNM's MaterniT21 and TrovaGene's Precision Cancer Monitoring (PCM) Platform use same method for diagnosis, it should provide Welch with a solid understanding of the underlying technology.

However, the analyst cut his target price to $5, from $9, saying, "We may become more positive with the shares once we have improved confidence in the stability of management and the commercialization team."

Shares of TrovaGene fell about 26 percent to $4.57.