Battleground: Analysts Diverge On Bluebird Bio Sickle Cell Risk
Yesterday, Morgan Stanley analyst Matthew Harrison downgraded bluebird bio (BLUE), arguing that the risks ahead of the company's presentation of LentiGlobin sickle cell data at December's American Society of Hematology meeting are being underappreciated. This morning, however, Wells Fargo analyst Jim Birchenough voiced a different opinion, recommending buying the stock on weakness as he believes his peer's analysis of the company's LentiGlobin gene therapy program for Sickle Cell Disease is flawed.
BUY ON WEAKNESS: In a research note to investors, Wells Fargo's Birchenough reiterated an Outperform rating on shares of bluebird bio and recommended buying on weakness, following a call with management and what he believes to be flawed competitor analysis related to the company's LentiGlobin gene therapy program for Sickle Cell Disease. With concerns raised regarding correlation between ex vivo drug product vector copy number and in vivo peripheral vector copy number, the analyst argued that pooling of small patient numbers, from different studies, not consistently exposed to the same gene therapy product or transplant protocol, provides an inadequate framework for correlation analysis and conclusion on prospects for clinical success in sickle cell. Importantly, Birchenough pointed out that at the current bluebird bio share price of $120/share, only $16/share is attributable to SCD, with an implied likelihood of success of only 10%, and that base value of $104/share can be supported by BCMA CAR-T, LentiGlobin for Beta Thalassemia, and gene therapy for adrenoleukodystrophy.
MORGAN STANLEY SAYS SELL BLUEBIRD: Yesterday, Morgan Stanley's Harrison downgraded bluebird bio to Underweight from Equal Weight, as he believes the risks ahead of the company's presentation of LentiGlobin sickle cell data at December's ASH meeting remains underappreciated. His concerns stem mainly from his view that Process 2 manufacturing is not enough to drive higher hemoglobin responses. The analyst, who noted the stock is up over 40% since Gilead's (GILD) acquisition of Kite Pharma set off excitement about the CAR-T space that blue is also in, does not believe the ASH data will demonstrate the improvement in hemoglobin production necessary to increase confidence in sickle cell genetherapy. His premise is that to improve hemoglobin production in sickle cell patients, the correlation between drug-product vector copy number and peripheral VCN needs to increase substantially. Harrison kept a $105 price target on bluebird bio shares.
PRICE ACTION: In afternoon trading, shares of bluebird bio have gained about 2% to $127.65. Yesterday the stock slid nearly 9% on the heels of Morgan Stanley's downgrade.