On Wednesday, JPMorgan downgraded bluebird bio (NASDAQ:BLUE) from Overweight to Neutral after the company's second-quarter results fell short of expectations. The firm pointed to bluebird bio's product sales of $16.1 million, which missed the consensus estimate of $22.6 million and JPMorgan's own estimate of $17.4 million. This revenue reflects treatments for eight Zynteglo and one Skysona patient during the quarter.
Despite bluebird bio's claim of steady commercial progress in its cell therapy portfolio for the second quarter, the biotechnology firm has revised its full-year 2024 guidance. The company now anticipates approximately 85 patient starts, which is at the lower end of its previous forecast of 85-105 patient starts. The adjustment is primarily due to advanced scheduling by patients extending into fiscal year 2025.
Additionally, the company now expects the first revenue from Lyfgenia to be recognized between the third and fourth quarters of 2024, with a lighter third quarter followed by a rebound in the fourth.
The downgrade also reflects concerns over the revised terms of bluebird bio's loan agreement with Hercules Capital (NYSE:HTGC). The new terms require additional capital raising to access further debt tranches, which JPMorgan believes will likely lead to share dilution.
The firm notes that securing non-dilutive funding options without affecting the existing Hercules agreement appears unclear, suggesting an increased dilutive pressure on bluebird bio shares in the near term.
JPMorgan also cited the company's flat quarterly operating expenses and cash spend expectations, along with limited visibility into product gross margins and profitability in the near to mid-term. With these factors in mind, the firm anticipates that bluebird bio's stock will trade within a range-bound pattern over the mid-term due to the challenging balance sheet outlook and potential downward revisions to Street models.
In other recent news, bluebird bio has reported a strong Q2 2024 performance with a significant revenue increase and a rise in patient starts for their gene therapies. The company's Q2 revenue was recorded at $16.1 million, a notable increase from the previous year.
Additionally, over 70 qualified treatment centers are currently operational with 27 patient starts completed this year. Despite an anticipated dip in third-quarter revenue due to manufacturing cycle times, bluebird bio predicts a strong rebound in the fourth quarter.
The company has secured Medicaid coverage and outcomes-based agreements for their therapies in multiple states, and it anticipates further growth in patient starts. The cash on hand is reported at $193.4 million, which is projected to last until Q2 2025, following the renegotiation of debt with Hercules Capital.
InvestingPro Insights
As JPMorgan adjusts its stance on bluebird bio (NASDAQ:BLUE), real-time data from InvestingPro provides a deeper look into the company's financial health and market performance. With a market capitalization of $204.31 million, bluebird bio has experienced a significant revenue growth of 322.68% over the last twelve months as of Q3 2023. This impressive growth figure, however, contrasts with the company's current challenges, as indicated by a negative P/E ratio of -2.24 for the same period, reflecting market skepticism about future earnings.
InvestingPro Tips suggest that analysts are expecting sales growth in the current year, yet they are also mindful of the company's rapid cash consumption. Additionally, bluebird bio's valuation implies a poor free cash flow yield, and analysts do not anticipate profitability for this year. In the last week, the company has seen a significant return of 12.43%, but this is set against a backdrop of a price that has fallen by 69.36% over the past year, trading near its 52-week low.
For investors considering bluebird bio, these insights and additional InvestingPro Tips, which can be found at https://www.investing.com/pro/BLUE, may provide valuable context for understanding the company's current position and prospects. With the company not paying dividends and facing profitability challenges, the strategic approach to investment in bluebird bio would be well-informed by the comprehensive analysis that InvestingPro offers, including additional tips beyond those mentioned here.
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