On Thursday, Goldman Sachs revised its rating for 2Seventy Bio Inc. (NASDAQ:TSVT) stock, shifting from Neutral to Sell and establishing a price target of $2.00.
The decision comes as the firm assesses the company's long-term prospects in the competitive landscape for its main product, Abecma, in the treatment of multiple myeloma.
2Seventy Bio faces significant competition from Johnson & Johnson and Legend Biotech's Carvykti, which boasts a differentiated profile and is expanding manufacturing capacity.
Additionally, Goldman Sachs anticipates further market share challenges from other therapies entering earlier lines of treatment, such as Gilead Sciences (NASDAQ:GILD) and Arcellx's anito-cel.
The firm also cites concerns over 2Seventy Bio's cost structure and margin profile, despite the company's efforts to reduce non-GAAP operating expenses to approximately $200 million by the end of 2025. Profit margins are expected to rely heavily on increased sales volumes, which are yet uncertain.
Compounding the company's challenges is the limited pipeline optionality following the recent sale of its pipeline to Regeneron (NASDAQ:REGN) Pharmaceuticals.
With no internal pipeline remaining, the analyst from Goldman Sachs takes a conservative stance on the potential of early-stage partnered programs.
Goldman Sachs will continue to monitor several factors, including the sales trajectory of Abecma in the third-line setting and beyond, where there is some potential for growth in the fiscal years 2025 and 2026.
The broader competitive landscape of multiple myeloma treatments, the progress of cost-cutting measures, and any incremental pipeline updates through Regeneron will also remain points of interest for the firm.
In other recent news, 2seventy bio announced significant developments during its First Quarter 2024 Earnings Conference Call.
The company reported a strategic shift to focus solely on its product, Abecma, after selling its oncology and autoimmune R&D programs to Regeneron, and reducing its workforce by 14%.
This decision aligns with the company's aim to return to growth in the latter half of the year and break even by 2025. The company also reported Abecma's U.S. revenues reached the projected $52 million.
In addition to these developments, 2seventy bio plans to achieve significant cost savings, and maintains its targeted net cash spend. The company also highlighted Abecma's efficacy and safety profile, particularly for earlier line triple class exposed patients.
It anticipates revenue growth in the third and fourth quarters with a focus on the third-line treatment setting. These are recent developments that reflect the company's strategic decisions and growth expectations.
InvestingPro Insights
In light of the recent downgrade by Goldman Sachs, investors may find the real-time data and analysis from InvestingPro particularly relevant for 2Seventy Bio Inc. (NASDAQ:TSVT). With a market capitalization of $234.41 million, 2Seventy Bio's financial health and stock performance metrics offer additional insights. The company's price-to-book ratio stands at 1.13 as of Q1 2024, indicating a potentially reasonable valuation relative to its book value, despite the challenges highlighted.
InvestingPro Tips suggest caution due to the company's rapid cash burn and anticipation of a sales decline in the current year. Moreover, the lack of profitability over the last twelve months and a significant expected operating income margin of -300.16% as of Q1 2024 reinforce concerns about the company's financial stability. However, it's noteworthy that the company's liquid assets exceed its short-term obligations, which could provide some financial flexibility in the near term.
For investors looking for a deeper dive into 2Seventy Bio's prospects, InvestingPro offers additional tips, including an analysis of stock price volatility and the lack of dividend payments, which may influence investment decisions. For access to these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 7 more InvestingPro Tips available for 2Seventy Bio, which could help investors navigate the complexities of this investment.
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