BBIO - BridgeBio: Bets Acoramidis As The Pfizer Spoiler

2023-09-25 23:05:32 ET

Summary

• BridgeBio Pharma's Q2 2023 YoY revenue plummeted, but PIPE financing extends cash runway to 15 months, alleviating short-term liquidity concerns.
• Acoramidis poses a threat to Pfizer's tafamidis in ATTR-CM space, pending FDA approval; yet high debt and complex capital structure loom large.
• Investment recommendation: "Buy" for high-risk tolerance investors, hinging on upcoming FDA decision on acoramidis and management of significant debt obligations.

At a Glance

In a follow-up to my previous analysis , BridgeBio Pharma ( BBIO ) continues to be a compelling biotech play despite recent financial headwinds. Q2 2023 revealed a YoY revenue drop and rising expenses, but the newly secured PIPE financing bolsters liquidity, extending the cash runway to nearly 15 months. The company's acoramidis remains a formidable contender in the ATTR-CM space, potentially disrupting Pfizer's ( PFE ) tafamidis dominance. However, BridgeBio's high debt and complex capital structure can't be dismissed. With a short interest of 15.88% and high institutional ownership, market sentiment is a wild card. I maintain a 'Buy' recommendation, but only for investors with a high-risk tolerance, as the FDA's imminent decision on acoramidis is pivotal.

Earnings Report

To begin my analysis, looking at BridgeBio Pharma's most recent earnings report , the company saw a significant year-over-year revenue decline from $73.7M to $1.6M for Q2 2023. Operating costs marginally decreased, led by a slight drop in research and development expenses from $108.4M to $107.5M. While SG&A costs remained stable at around $36M, the net loss increased dramatically from $2.6M to $160.7M for the quarter. The net loss per share also escalated to $0.98, from the prior year's $0.07.

Financial Health & Liquidity

Turning to BridgeBio Pharma's updated financials in light of the recent PIPE (Private Investment in Public Equity) financing, the company's liquid assets will augment by approximately $250M to $633.8M ($383.8M existing + $250M PIPE). The historical monthly burn rate remains at $42.9M, recalculating the cash runway to about 14.8 months. These values are based on past data and may not indicate future performance.

On the liquidity front, the additional $250M strengthens BridgeBio's financial footing considerably. However, the company still has significant debt obligations, including $735.9M in 2029 Notes and $542.5M in 2027 Notes, along with a $440.5M term loan. The PIPE deal may reduce immediate pressures to secure additional financing, but with the existing debt burden, continued financing strategies remain crucial for long-term viability. These are my personal observations, and other analysts might interpret the data differently.

Capital, Growth, Momentum, & Ownership

According to Seeking Alpha data, BridgeBio Pharma's capital structure shows a high debt burden, indicating significant leverage relative to its $4.43B market cap. This could be a liquidity risk. On the growth front, analysts project a revenue jump to $392.44M by 2025, a stark contrast to the current YoY revenue decline of 93.74%. However, such projections rely heavily on successful drug launches like acoramidis, making them speculative. Stock momentum outperforms SPY significantly across all timeframes, hinting at market optimism.

Ownership is heavily institutional at 57.38%, with PE/VC firms holding 19.12%, which may offer some stability but also implies a higher bar for performance. Insider trading reveals a recent trend of automatic sells , warranting close observation. Finally, a short interest of 15.88% suggests that the stock is currently a target for bearish investors and could be susceptible to short squeezes.

Acoramidis: The New Kid on Pfizer's Block

In the ATTR-CM space, BridgeBio Pharma's acoramidis is emerging as a promising contender to Pfizer's market-leading tafamidis. The recently released Phase 3 ATTRibute-CM trial results show acoramidis hitting a win ratio of 1.8 and a 50% reduction in cardiovascular-related hospitalizations. These results look favorably upon acoramidis, especially when stacked against tafamidis, which posted a hazard ratio of 0.70 for all-cause mortality and a relative risk ratio of 0.68 for hospitalizations in its trials.

However, let's proceed with caution here. Comparing two separate trials—each with its own set of controls and variables—is no straightforward task. Though the win ratios may make acoramidis appear slightly better, these metrics were derived from separate clinical settings and may not offer a direct one-to-one comparison.

Furthermore, the finer details, such as impacts on serum TTR and NT-proBNP levels, add layers of complexity. These secondary endpoints suggest that acoramidis might offer nuanced advantages over tafamidis, but a head-to-head trial would be the gold standard to affirm these differences.

It's also worth noting that the demand for ATTR-CM treatments is burgeoning. Diagnosed cases have ballooned from fewer than 5,000 in 2019 to over 30,000 in 2021. Acoramidis, if approved, could enter this rapidly expanding market at an opportune moment.

In sum, acoramidis could be a game-changer, but the investment community should take heed. The aforementioned comparisons are subject to interpretation, filtered through my lens of clinical analysis. The FDA’s nod, or lack thereof, for acoramidis will be the next pivotal moment to shape this narrative.

My Analysis & Recommendation

In conclusion, the recent financial performance of BridgeBio Pharma offers a mix of cautious optimism and latent concern. On one hand, the surge in liquid assets due to the recent PIPE financing indicates that the firm is cushioning its financial moat. On the other, existing debt obligations cannot be ignored, particularly when balanced against heightened operating costs.

Investors should now pivot their attention towards the marketization phase. The Phase 3 ATTRibute-CM trial results for acoramidis are indeed encouraging, but the metrics cannot be interpreted in isolation. Market acceptance, adoption rates, and competitive edge against Pfizer's tafamidis will play equally crucial roles in the value accrual process for BridgeBio. Furthermore, the high institutional ownership implies not just stability but also a heightened expectation for performance. This can be a double-edged sword, intensifying scrutiny and magnifying the impact of any operational missteps.

Given the heavy reliance on successful drug launches like acoramidis, it’s imperative to focus on the FDA's upcoming decision. Keep a keen eye on BridgeBio’s strategy for label expansion and market penetration post-FDA approval. Also, monitor how the company manages its existing debt, particularly in the event of any unanticipated R&D setbacks or delays. The high short interest ratio should not be overlooked; it places the stock squarely in the crosshairs of bearish sentiment, rendering it susceptible to market volatility.

Based on my clinical and financial analysis, I'm maintaining a "Buy" recommendation for BridgeBio Pharma. Despite the alarm bells that the financials may ring and the looming FDA decision, the PIPE deal and promising acoramidis data offer a reasonable counterbalance. The growing demand for ATTR-CM treatments further cements the prospective value proposition of acoramidis, and by extension, BridgeBio. However, given the complex financial landscape and risk profile, this recommendation comes with the caveat that only those investors with a high tolerance for volatility should consider adding this stock to their portfolio.

Risks to Thesis

While my "Buy" recommendation still holds, I could have underestimated the impact of regulatory risks. The FDA's pending decision on acoramidis is a binary event; failure to secure approval will significantly harm the investment thesis. Additionally, acoramidis may face reimbursement challenges and overwhelming competition post-approval, affecting its market penetration. My focus on institutional ownership as a risk mitigator may be overemphasized; high institutional ownership could lead to abrupt selloffs upon negative news. Moreover, the debt burden remains a significant liquidity risk, which I may have underweighted. The current cash runway allows for less error in execution than I previously assessed.

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