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bluebird bio: All the Wrong Moves Send This Analyst to the Sidelines
Stock Analysis & Ideas

bluebird bio: All the Wrong Moves Send This Analyst to the Sidelines

The new week begun in the worst possible way for bluebird bio (BLUE) investors, with shares shedding 27% of their value in Monday’s session.

The drawdown followed the release of the company’s Q2 earnings, but the selloff had little to do with the financials but were a reaction to not one but two disappointing updates.

First off, the company announced it had been told by the FDA to put on hold its phase 3 study evaluating eli-cel (also known as Lenti-D) as a treatment for cerebral adrenoleukodystrophy (CALD) after one patient in the Phase 3 ALD-104 trial reported a serious adverse reaction a year following treatment with eli-cel, likely due to lentiviral vector insertion.

Secondly, bluebird announced the shutdown of EU commercial operations because of difficulties in negotiating with EU payers and have decided to focus wholly on the US market.

Reflecting investors’ sentiment, Leerink Partners’ Mani Foroohar is not impressed.

“While the specifics of the safety event may not have read-across to LentiGlobin in sickle cell disease (SCD) and beta-thalassemia (TDT), it does reflect an ongoing overhang of future headline risk, and the aborted launch in the EU raises questions on commercial execution and management’s understanding of the reimbursement landscape in key end-markets,” the analyst said.

These latest developments add to other recent events – the issues surrounding the recently resolved pause to the sickle cell disease program and the previously announced transaction with National Resilience which reduced the value of the company’swholly controlled manufacturing infrastructure. All of which “remove the key legs” of Foroohar’s argument for “underappreciated value in BLUE shares.”

As such, Foroohar admits his current thesis is “untenable.” The result of which is a downgrade of BLUE’s rating from Outperform (i.e., Buy) to Market Perform (i.e., Hold) and a slash to the price target from $64 all the way down to $20, leaving room for 10% upside from current levels. (To watch Foroohar’s track record, click here)

Almost all of Foroohar’s colleagues are on the same page. Barring 1 Buy, all other 16 reviews on record say Hold, culminating in the stock’s Hold consensus rating. Interestingly, however, as the shares have lost 58% year-to-date, the average price target of $23.15 implies ~21% upside from current levels. (See BLUE stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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