J.P. Morgan's Downgrade of Allogene and Pliant Therapeutics: Assessing the Credibility of Market Pessimism in Cell Therapy and Fibrosis Sectors

J.P. Morgan's recent downgrades of Allogene Therapeutics (ALLO) and Pliant Therapeutics (PLNT) have sparked debate about the validity of market pessimism in the cell therapy and fibrosis sectors. While the firm's analysts cite operational and financial risks, the broader industry trends suggest a nuanced picture. This analysis evaluates the credibility of J.P. Morgan's concerns by contextualizing the downgrades within sector dynamics, historical precedents, and macroeconomic pressures.

Allogene Therapeutics: A Programmatic Setback or a Strategic Reassessment?

J.P. Morgan downgraded Allogene from Neutral to Underweight on October 10, 2025, citing modifications to its cema-cel program following a fatal event, according to a U.S. cell therapy report. The removal of the CD52 component-a critical element for durability and response rates in hematological malignancies-has raised questions about the therapy's efficacy, according to a fibrotic disease report. While the firm acknowledges the "rational and unavoidable" nature of the change, it highlights historical data showing CD52's role in improving outcomes for non-Hodgkin lymphoma and multiple myeloma, as noted in the fibrotic disease report.

Allogene's financials further fuel the downgrade. Despite holding more cash than debt, the company is "burning through cash" with no near-term catalysts on the horizon, per the fibrotic disease report. This mirrors broader challenges in the cell therapy sector, where high development costs and manufacturing complexities often delay profitability. For instance, Bluebird Bio faced similar scrutiny in 2024, with J.P. Morgan downgrading it due to limited funding options and negative gross margins, as discussed in a global cell therapy report (see below)Cell Therapy Market Size, Growth | Global Report [2033]. Allogene's situation underscores the sector's vulnerability to programmatic disruptions and capital constraints.

However, the cell therapy market remains robust. The U.S. market is projected to grow at a 21.46% CAGR through 2034, driven by allogeneic therapies and oncology applications (the U.S. cell therapy report). Innovations like EchoBack CAR T-cells and HSP-CAR30 therapies demonstrate the sector's resilience (the U.S. cell therapy report). Allogene's pivot to an off-the-shelf model, though risky, aligns with industry trends aimed at reducing costs and scaling production.

Pliant Therapeutics: Strategic Uncertainty in the Fibrosis Landscape

Pliant's downgrade stems from the discontinuation of its bexotegrast program for idiopathic pulmonary fibrosis (IPF), following safety concerns raised by the Data and Safety Monitoring Board (the U.S. cell therapy report). The voluntary pause in the Phase 2b BEACON trial has left the company's strategic direction unclear, with J.P. Morgan noting its liquidity is being "rapidly consumed" (the U.S. cell therapy report). Pliant's exploration of in-licensing or mergers reflects the sector's shift toward consolidation amid high R&D costs.

The fibrosis market, however, remains a growth engine. The global fibrotic disease treatment market is projected to expand at a 7.60% CAGR through 2034, driven by advancements in biologics and small molecules, according to the fibrotic disease report. Cystic fibrosis therapeutics, in particular, are booming, with Vertex Pharmaceuticals' Trikafta and Alyftrek leading the charge (the U.S. cell therapy report). Pliant's pivot to alternative assets could position it to capitalize on this growth, but the lack of a clear pipeline post-bexotegrast raises red flags.

Historical Precedents and Sector-Wide Trends

J.P. Morgan's downgrades of Allogene and Pliant echo its 2024 actions against Bluebird Bio, which faced similar concerns over cash runway and commercial progress, as outlined in the global cell therapy report. Bluebird's restructuring efforts, including cost optimization and a focus on quarterly cash flow break-even, highlight the sector's need for operational discipline (the global cell therapy report). While Allogene and Pliant are not in the same dire straits, their challenges reflect systemic issues: high R&D costs, regulatory hurdles, and the pressure to demonstrate near-term value.

The broader cell therapy sector, however, is not without promise. The global market is expected to grow from $114.64 billion in 2024 to $366.21 billion by 2033 at a 13.5% CAGR, per the global cell therapy report. Allogeneic therapies, in particular, are gaining traction as scalable solutions for cancer and autoimmune diseases (the global cell therapy report). For Allogene, the modified cema-cel program could still succeed if the company leverages its expertise in allogeneic platforms.

Macro Risks and Investor Sentiment

J.P. Morgan's broader market outlook for 2025 includes warnings about overvalued stocks and potential corrections, highlighted in a market strategist warning. The firm's caution extends to biotech, where elevated valuations and macroeconomic uncertainty-such as rising interest rates-have dampened investor appetite (the market strategist warning). This context amplifies the downgrades, as analysts prioritize defensive plays and cash-generative businesses.

Yet, the fibrosis and cell therapy sectors remain attractive due to unmet medical needs and innovation pipelines. For example, the cystic fibrosis therapeutics market in the U.S. is projected to grow at an 8.22% CAGR through 2033 (the U.S. cell therapy report). Pliant's pivot to in-licensing could tap into this demand, though execution risks remain.

Conclusion: Credible Concerns, But Not a Sector-Wide Collapse

J.P. Morgan's downgrades of Allogene and Pliant Therapeutics are rooted in valid operational and financial risks. Allogene's program modifications and cash burn, coupled with Pliant's strategic uncertainty, justify short-term skepticism. However, the broader sectors remain resilient, driven by technological advancements and unmet medical needs. Historical precedents, such as Bluebird Bio's restructuring, suggest that companies can navigate these challenges with disciplined execution.

Investors should view the downgrades as cautionary signals rather than definitive verdicts. While the near-term outlook for Allogene and Pliant is murky, the long-term potential of cell therapy and fibrosis treatments remains intact. The key will be whether these companies can adapt to evolving market demands and demonstrate value creation-both in their pipelines and financial stewardship.