Analysts Weigh In on Two Biotechs: bluebird bio, inc. (BLUE), Agios Pharmaceuticals (AGIO)

Analysts are weighing in on biotech companies bluebird bio Inc (NASDAQ:BLUE) and Agios Pharmaceuticals Inc. (NASDAQ:AGIO), with mixed ratings. The iShares Biotechnology ETF (IBB) is trading more than 2.5 percent lower on Tuesday, as Wall Street digested a slew of corporate earnings reports.

bluebird bio Inc.

Yesterday afternoon, bluebird’s stock dropped 6.5% to $79.99; this is the lowest the stock has fallen this year. The slump was in response to the company’s presentation of an incremental update at the 10th Annual Cooley’s Anemia Foundation Symposium in Chicago. The company discussed its ongoing clinical study of HGB-205, which uses LentiGlobin® BB305 for treating severe sickle cell disease.

JP Morgan’s Cory Kasimov weighed in following the update, maintaining an Overweight rating without providing a price target. Simply put, Kasimov commented, “Bottom line, we see little read-through from this update to BLUE’s current programs given the improvements made in the vector and think the sudden sell-off is overdone.”

At the conference, the presenter provided an update on patient 1003 “a B-Thal patient who had been treated with the first-gen product in a prior proof-of-concept study.” Kasimov explains the update that negatively impacted the stock: “After 7 years of transfusion independence, patient 1003 recently required 2 blood transfusions after experiencing clinical anemia symptoms – though the expression of T87Q globin and the patients VCN (vector copy numbers) has remained largely unchanged.”

Referring to the sharp sell-off, Kasimov said, “We see the sharp drop-off in shares as an overreaction, though not necessarily surprising given sentiment recently.” He added, “Given recent focus on/concern around competition for LentiGlobin, on top of the overall skittishness of the biotech market, we aren’t surprised to see this knee-jerk reaction, though we think it’s overdone and would expect shares to rebound as investors have time to actually digest the update.”

Sharing his analysis behind the stock drop, he said, “Given concerns around durability of effect in gene therapy broadly, we understand why this update may have spooked people. That said, we would note that there doesn’t actually seem to be a durability issue here given expression of corrected globin was unchanged as was the VCN.”

Cory Kasimov has a 40% success rate recommending stocks with an average loss of -2.5% per rating when measured over a one-year horizon and no benchmark.

Of the 7 analysts who have recently rated bluebird bio’s stock on TipRanks, all of them have rated the stock as a Buy. The average consensus price target for the stock is $196.67, an upside of 125% over current levels.

Agios Pharmaceuticals Inc.

Last week, Agios Pharmaceuticals provided an overview of its five pipeline programs on R&D Day. The company focused on its lead products; AG-221, AG-120, and AG-348. The first two candidates are cancer therapies and the third aims to treat Pyruvate Kinase Deficiency. In light of the updates, analyst Ling Wang of Oppenheimer maintained a Perform rating on the stock though he did not provide a price target.

According to Wang, the key clinical developments shared by the company included “the initiation of phase III IDHENTIFY trial of AG-221 in relapsed/refractory AML (Acute myeloid leukemia); highlight of future development strategy for AG-120 and AG-221 in front-line AML; the announcement of a second PKR (pyruvate kinase-R) activator AG-519, and discussions of potential expansion opportunities for the PKR activator program.”

In the report, the analyst stated, “We see the unique strategy to target the potential underlying driving forces of the diseases as substantially reducing the risks associated with drug development.”

According to the Wang’s investment thesis, “AGIO’s lead oncology candidates, AG-221 and AG-120 (IDH2 and IDH1 inhibitors, respectively) have established preliminary proof-of-concept in AML while initial readout in solid tumors is expected in 4Q15 for AG-120.” As for the other lead candidate, AG-348, Wang commented, “[the program] targets pyruvate kinase-R for the treatment of PK deficiency, a rare genetic disorder.” Overall, Wang sees “the current valuation as having factored in several positive outcomes, including the potential success of AG-120 and/or AG-221 in solid tumors and of AG-348 in PK deficiency.”

The analyst also noted some potential upsides to the stock, such as “Faster than anticipated launch and market penetration” of the company’s lead products in the US and the EU.” On the other hand, there are risks such as “failure across all phase trials or a range of split outcomes [that could] jeopardize FDA and/or EMA approval, and/or require additional clinical work that delays cash flows and/or creates an unexpected financing gap.”

According to TipRanks, Ling Wang has a 35% success rate recommending stocks with a -6.5% average loss per rating when measured over a one-year horizon and no benchmark. One other analyst on TipRanks has recently rated Agios with a neutral rating.

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