Roth Reinstates Coverage On Bluebird Bio, Sees Massive 50% Upside

• bluebird bio Inc BLUE shares 39 percent year-to-date, even after trading above $140 on September 18.
• Roth Capital Partners’ Elemer Piros reinitiated coverage of the company with a Buy rating and a price target of $121.
• Piros said that there is upside from sickle cell disease, which is a significantly larger indication than β-thalassemia.

Analyst Elemer Piros wrote, “bluebird was the first to demonstrate potentially curative benefits of gene therapy in inherited hemoglobin disorders. Skepticism developed when the most severe β-thalassemia patients did not achieve desired results.”

Piros recommended focusing on sickle cell disease, or SCD, on account of it being a much larger indication.

There was investor concern over bluebird reporting three patients suffering from the most severe form of β-thalassemia had not became transfusion independent. The analyst add, however, that these patients may not represent “the right target population” for gene therapy.

Related Link: Bluebird Bio Selling 'An Overreaction,' Data Is 'Fantastic' Says Biotech Expert

This population includes about 300 out of every 1,000 patients suffering from β-thalassemia major in the US, which is the market where the pricing power for gene therapy exists. Piros estimated the market potential for SCD being more than 50 times larger than β-thalassemia, the formed being valued at $10 billion versus $200 million for the latter, taking into account the US and key EU countries.

“We believe there is a significant upside to our valuation, given the additional opportunities embedded in the platform, not to mention ex-U.S.-EU markets, which aren’t included in our calculation,” the Roth Capital Partners report stated.

Piros added that childhood cerebral adrenoleukodystrophy, CCALD, pivotal data is expected in 2016. Although data represents additional proof-of-concept, commercial opportunity appears very limited.