Company Overview
Headquartered in Cambridge, Massachusetts, Blueprint Medicines Corporation (NASDAQ: BPMC) is a global precision therapy company incorporated in 2008. The company is dedicated to developing life-changing therapies for cancer and hematologic disorder patients. It offers licensed medicines directly to patients in the United States and Europe and is also advancing various initiatives for genomically defined cancers, systemic mastocytosis, and cancer immunotherapy globally.
BPMC Details
Commercial Therapies, FDA Approvals, and Encouraging Trial Data
Blueprint Medicines Corporation (NASDAQ: BPMC) is mainly focused on developing therapies for cancer patients. Its commercial products include AYVAKIT/AYVAKYT (avapritinib) for the treatment of individuals with PDGFRA exon 18 mutant gastrointestinal stromal tumors (GIST), and GAVRETO (pralsetinib) for the treatment of metastatic RET fusion-positive non-small cell lung cancer (NSCLC), advanced or metastatic RET-mutant medullary thyroid cancer (MTC) and advanced or metastatic RET fusion-positive thyroid cancer.
Apart from the already revenue-generating products, on June 16, 2021, the company received approval from the U.S. Food and Drug Administration (FDA) for its trademark AYVAKIT for the treatment of adult patients with advanced systemic mastocytosis (Advanced SM), including aggressive SM (ASM), SM with associated hematological neoplasm (SM-AHN) and mast cell leukemia (MCL). This is the first-ever precision therapy to target the central driver of SM.
It is also worth noting that on May 19, 2021, BPMC updated its Phase 1/2 ARROW trial data, which shows that GAVRETO offers long-term therapeutic advantages in metastatic RET fusion-positive non-small cell lung cancer NSCLC and other advanced solid tumors. GAVRETO also demonstrated substantial response rates in treatment-naive patients with RET fusionpositive NSCLC and included clinical activity across a wide variety of RET fusion-positive tumor types.
Q1FY21 Key Results Highlights
During Q1FY21 (ended March 31, 2021), BPMC reported a sharp 2.5x increase in total revenue to USD 21.57 million from USD 6.17 million in Q1FY20. The collaboration revenue, under collaborations with F. Hoffmann-LaRoche Ltd. and Genentech, Inc. (collectively, Roche), and CStone Pharmaceuticals, was USD 12.62 million in Q1FY21, 3.66x of USD 2.71 million generated in Q1FY20. However, the net loss for Q1FY21 was USD 99.71 million, lower than USD 110.96 million in Q1FY20. During the quarter, the company reported selling, general, and administrative (SG&A) expenses of USD 42.00 million, depicting a rise of 17.80% year over year, owing to the additional costs associated with the marketing of AYVAKIT/AYVAKYT and GAVRETO.
Revenue & Gross Profit; Analysis by Kalkine Group
Other Key Developments
During Q1FY21, BPMC received approval from the European Medicines Agency (EMA) to market the Type II variation for AYVAKYT for the treatment of advanced SM. This approval signifies that the company’s submission is now complete, and the next step towards the commercialization of AYVAKYT is the beginning of the formal review process. In addition, it also received a go-ahead from the FDA for its investigational new drug (IND) application for BLU-945 (for the treatment of EGFR-driven NSCLC).
Key Metrics, Liquidity & Balance Sheet Details
The company exited the quarter with a cash balance of USD 697.97 million. Its property & equipment fell slightly to USD 32.99 million from USD 34.13 million reported at the end of FY20. BPMC had no debt as of March 31, 2021.
In Q1FY21, the Gross margin was 99.5%, at par with the year-ago figure of 99.6% and higher than the industry median of 89.4%. ROE in Q1FY21 was -6.9% vs industry median of -8.0%.
Profitability and Liquidity Profile; Analysis by Kalkine Group
Top 10 Shareholders
The top 10 shareholders together form around 45.76% of the total shareholding, while the top 4 constitute the maximum holding. The Vanguard Group, Inc. and BlackRock Institutional Trust Company, N.A. hold the maximum stake at 9.45% and 7.17%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis
On the downside, the company has only two approved precision therapies (AYVAKIT/AYVAKYT and GAVRETO). While it has initiated the commercial launch of both the therapies in the US and of AYVAKYT in Europe, it has limited experience as a commercial company. Should it fail to successfully commercialize its current or future approved drugs, its operations and financial state of affairs could be seriously affected. Further, BPMC is dependent on third-party suppliers for the production of its drugs and does not have a manufacturing facility of its own. This may hamper its ability to meet product demand and hence, the business as a whole. Also, rising expenses and stiff competition from peers may weigh on the company's future financial performance.
Outlook
With the receipt of FDA approval, the company now plans to launch AYVAKIT for treating advanced SM and initiate a global Phase 1 trial of BLU-945, a potent and selective triple-mutant EGFR inhibitor in FY21. Its other plans for the remainder of the year include the commencement of Phase 2/3 of BLU-263 trial for treating non-advanced SM and Phase 1 trial of BLU-701 for patients suffering from treatment-resistant EGFR-driven NSCLC.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation
Over the last six months, the stock went down by ~18.77%. The stock is currently quoting towards the lower band of its 52-week trading range of USD 66.20 to USD 125.61. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of an upside of high teens (in percentage terms). We believe that the company can trade at a slight premium as compared to its peer’s average, despite the risks involved with the uncertainties of medical R&D outcomes, stiff competition from peers, along with stringent regulatory scrutiny. We have taken peers like Agios Pharmaceuticals Inc. (NASDAQ: AGIO), Seagen Inc. (NASDAQ: SGEN), among others. Considering the company’s robust Q1FY21 performance, global presence, consistent growth initiatives both in terms of development and commercialization, current trading levels, and valuation, we give a “Buy” recommendation on the stock at the closing price of USD 85.11, down ~0.82% on July 07, 2021.
BPMC Weekly Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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