BBIO - BridgeBio Pharma's Robust Pipeline Could Benefit From A Partner

2024-01-08 03:18:45 ET

Summary

• BridgeBio’s FDA filing for acoramidis and advances in KRAS mutation cancer treatment contrast with growing financial losses.
• Acoramidis competes with Pfizer’s ATTR-CM treatments; BBIO's oncology focus includes promising KRAS inhibitors and RAS-targeting strategies.
• Financially, the Company reports increased net loss and share count, yet possesses a solid short-term solvency with high long-term debts.
• Recommendation: BridgeBio’s robust pipeline, especially in oncology, outweighs financial concerns, suggesting a "Buy" with caution for risks.

At a Glance

BridgeBio Pharma's ( BBIO ) path has notably shifted. Since my last review , their FDA filing for acoramidis and advancements in cancer treatment, especially for KRAS mutations, are notable. However, financial hurdles are still evident, with a growing net loss and rising shares hinting at possible dilution of shareholder value. Their current ratio suggests solid short-term solvency, alleviating some worries. Yet, sizable long-term debts and hefty operational costs are looming concerns. While BridgeBio stands out for its large and robust pipeline, investors must weigh these prospects against the evolving financial and operational risks highlighted in this update.

Recent Events

Last month, BridgeBio submitted an FDA application for acoramidis to treat ATTR-CM. This places it in competition with Pfizer's ( PFE ) Vyndamax/Vyndaquel in the ATTR-CM market. According to Leerink, acoramidis may generate $1.8 billion in peak annual sales. Despite the fact that acoramidis is viewed as a viable alternative to Pfizer's approach, Vyndamax/Vyndaquel is predicted to capture the "lion's share" of the estimated $10 billion ATTR-CM market.

KRAS Revamped: BridgeBio's Bold Leap in Cancer Therapy

My first article on BridgeBio focused solely on acoramidis, and for good reason: this is the company's most important asset right now. However, there is much more beneath the surface here.

I would like to now discuss their other prospects, specifically their oncologic endeavors. For one, BBO-8520 is a pioneering KRASG12C [ON] inhibitor. This drug marks a potential paradigm shift. It zeroes in on KRAS's 'ON' state, a novel strategy. This approach might yield more precision and effectiveness. It's due to its direct engagement with the altered, active KRAS found in numerous tumors. The company just announced IND clearance and anticipates starting a Phase 1 trial later this year.

Another contender is BBO-10203. It's a PI3K?:RAS breaker, edging towards an IND application. This candidate disrupts PI3K? and RAS interactions. This could hinder vital cancer cell growth and survival pathways. Here, we see a strategy shift, tackling cancer's intricate molecular interplay.

Also noteworthy is the pan-KRAS program. It targets various KRAS mutations. This method could be applicable across multiple cancer types. It addresses RAS-driven cancers' heterogeneity.

These advances, BBO-8520, BBO-10203, and the pan-KRAS program, signal a significant oncology shift. The focus shifts from conventional inhibitors to advanced, likely more effective tactics. This evolution promises impactful changes, offering fresh hope for patients with RAS-driven cancers.

This trend is part of a broader oncology market movement. The market for KRAS-targeting drugs is poised to exceed $4 billion by 2029. Leaders like Amgen ( AMGN ) and Bristol-Myers Squibb ( BMY ) (formerly Mirati Therapeutics) are at the forefront with sotorasib and adagrasib, especially in NSCLC treatments. These efforts indicate a robust pipeline committed to evolving KRAS-targeting therapies, challenging a previously "undruggable" mutation.

Importantly, unlike other companies that buy assets to follow a trend, BridgeBio's foray into oncology does not appear desperate and is consistent with its mission statement from 2021.

(...) to discover, create, test and deliver transformative medicines to treat patients who suffer from genetic diseases and cancers with clear genetic drivers.

Q3 Earnings

BridgeBio reported a Y/Y revenue increase to $4.1 million in 2023, from $0.34 million in 2022. However, the company's net loss widened from $137.3 million to $177 million due to increased research and development expenses. The share count also increased from 147.9 million to 163.3 million, which impacts shareholder value and results in a higher net loss per share.

Financial Health

BridgeBio's balance sheet reveals assets totaling $543.3 million. This includes $505.2 million in cash and equivalents. Equity investments add $38.1 million.

Liabilities loom large. Accounts payable: a mere $4.5 million. Accrued expenses hit $93.0 million. These span compensation, R&D, and other costs. Lease liabilities are $4.1 million. Deferred revenue stands at $6.6 million. Then, the debts: 2029 Notes ($736.4 million), 2027 Notes ($542.9 million), and a term loan ($441.7 million).

A current ratio of 5.13 suggests strong short-term solvency. However, BridgeBio's net operating cash usage over nine months is considerably high at $402.9 million. This indicates a monthly burn of about $44.8 million.

Their liquid assets, divided by this burn rate, give them a 12-month cash runway. But remember, this is a historical estimate. Actual future performance might deviate.

BridgeBio might seek more funds soon. Despite a solid current ratio, their long-term debt paints a concerning picture.

Market Sentiment

BridgeBio has a complex investment profile with a market capitalization of $6.56 billion and is positioned in a moderate market segment. Analysts predict a revenue increase from $15.13 million in 2023 to $320.84 million in 2025, indicating a high growth trajectory. Stock momentum has outperformed the S&P 500 ( SPY ), with a +390.76% over the past year.

Short interest is significant at 15.80%, with 17.09 million shares short, indicating market skepticism or the potential for a short squeeze. Institutional ownership is high at 93.79%, with key institutions like Kohlberg Kravis Roberts & Co. and Viking Global Investors maintaining substantial positions. Insider trades show a concerning trend of zero buys and considerable selling over the past year, potentially indicating insider uncertainty about the company's future.

BridgeBio's market sentiment can be classified as "adequate" given the convergence of positive and negative data.

My Analysis and Recommendation

BridgeBio stands out with its vibrant pipeline. Key players include acoramidis for ATTR-CM and novel oncology assets like BBO-8520 and BBO-10203. Acoramidis challenges Pfizer's dominance in a profitable market with Vyndamax/Vyndaquel. Furthermore, their approach in KRAS mutations is pioneering. The KRAS-targeted drug sector is set to expand, positioning BridgeBio at the forefront of a significant opportunity.

Yet, financial worries for BridgeBio persist. Their increasing net loss and share dilution are concerning. But, a solid current ratio and a year's cash runway suggest short-term stability. Long-term debt, though, demands strategic financial maneuvers.

I anticipate news of a possible EU partnership for acoramidis. Such a deal could inject non-dilutive capital, essential for stabilizing BridgeBio's shaky finances. It might also offset further stock dilution risks.

Investors mulling over BridgeBio must consider high operational costs versus the pipeline's market potential. Investment diversification and monitoring FDA developments and partnerships are wise. Risks include clinical trial hiccups, regulatory issues, and funding or partnership challenges.

To sum up, BridgeBio has strong potential for significant biotech growth. Its market innovation, coupled with financial strategies and potential alliances, supports a "Buy." But investors must stay alert to risks and the company's financial management needs.

For further details see: