On Friday, BofA Securities adjusted its stance on bluebird bio (NASDAQ:BLUE) shares, downgrading the biotechnology company's stock from Buy to Neutral. The firm also significantly reduced the price target to $0.50 from the previous $3.00. The downgrade follows bluebird bio's third-quarter update, which prompted a reassessment of the company's financial outlook, particularly concerning its key product, Lyfgenia for Sickle Cell Disease (SCD).
The analyst cited a slower ramp-up and lower peak revenue expectations for Lyfgenia as primary reasons for the downgrade. The fourth-quarter outlook from bluebird bio indicates lighter product revenues, projecting $25 million compared to the consensus estimate of $28 million.
This adjustment comes in light of recent discussions with physicians who specialize in hematology and stem cell research. Key opinion leaders in the field have pointed out a more modest initial uptake of the therapy and patient hesitancy to start gene therapy, although attitudes may shift following serious disease-related events.
BofA Securities also reduced its sales forecasts for Lyfgenia, anticipating a decrease of approximately 6-18% between 2025 and 2028. The peak sales estimate has been adjusted downward from $730 million to $540 million. Despite acknowledging the importance of gene therapy for SCD as a significant medical advancement, the revised price objective reflects the market challenges bluebird bio is likely to face.
The updated price target also takes into account the potential dilution from bridge financing needed to access additional tranches of the Hercules loan and to maintain operations beyond the first quarter of 2025. This strategic financial move is seen as necessary for bluebird bio to continue its development and commercialization efforts for Lyfgenia and other products in its pipeline.
In other recent news, bluebird bio reported a decline in its third-quarter revenue, recording $10.6 million, which fell short of the $18.3 million consensus estimate. The company also announced a reduced cash runway, expected to last into the first quarter of 2025. Amidst these financial challenges, bluebird bio faced a setback with a failed proxy vote, limiting its ability to raise capital through equity financing.
Despite these hurdles, bluebird bio achieved a significant milestone with the first infusion of Lyfgenia, marking the beginning of revenue recognition for the therapy. The company is also increasing the rate of patient starts across its product portfolio. However, concerns have been raised about the conversion rates from cell collection to infusion, leading to skepticism about the company's target of reaching 40 infusions per quarter.
JPMorgan, given these challenges and limited options available to the company to secure its financial future, downgraded bluebird bio's shares from Neutral to Underweight. On the other hand, CEO Andrew Obenshain announced during their Third Quarter 2024 Earnings Call a rise in patient starts and a projected path to cash flow breakeven by the second half of 2025.
This is contingent on securing additional cash resources. Despite a dip in Q3 revenue, Bluebird bio anticipates a recovery to at least $25 million in Q4, as patient infusions are set to increase.
InvestingPro Insights
Recent data from InvestingPro paints a challenging picture for bluebird bio (NASDAQ:BLUE), aligning with BofA Securities' downgrade. The company's market capitalization has dwindled to just $64.88 million, reflecting investor concerns about its financial health and growth prospects.
InvestingPro Tips highlight that bluebird bio is "quickly burning through cash" and "operates with a significant debt burden," which supports the analyst's concerns about the need for bridge financing. Additionally, the tip that "short-term obligations exceed liquid assets" underscores the company's precarious financial position.
The stock's performance has been notably poor, with InvestingPro data showing a staggering 88.98% decline over the past year. This steep drop is consistent with the downgraded outlook and reduced price target from BofA Securities.
Despite these challenges, there is a glimmer of hope. An InvestingPro Tip indicates that "analysts anticipate sales growth in the current year," which could be linked to the potential of Lyfgenia, albeit with tempered expectations. However, investors should note that according to another tip, analysts do not expect the company to be profitable this year.
For readers seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for bluebird bio, providing a deeper understanding of the company's financial situation and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.