Leerink: Bluebird Bio's Catalysts Are Priced In

Shares of bluebird bio Inc (NASDAQ:BLUE) are up 360 percent over the last two years, but Leerink said the stock’s losing steam.

The Rating

Leerink analyst Michael Schmidt downgraded Bluebird from Outperform to Market Perform and increased the price target from $162 to $194.

The Thesis

When Leerink initiated coverage with a Buy in 2016, the firm considered bluebird's bb2121 and LentiGlobin products largely underappreciated in the market. Now, after years of positive development, Bluebird’s clinical stage pipeline and $10.8-billion market cap are fairly valued, Schmidt said. (See the analyst's track record here.) 

“2018 looks to be an execution year, and visibility on additional value-creating catalysts which are not already reflected in the stock is limited in our view,” Schmidt said in a Thursday note.

Leerink's projections account for increased confidence in the pipeline’s probability of success.

Bluebird trades at a “significant” premium — one meriting a $194 price target — and may ultimately be targeted for acquisition, Schmidt said. But the takeover timeline is uncertain, particularly as the firm is two years out from generating meaningful product sales.

The only catalysts expected in the coming year are the completion of Lenti-D’s Starbeam trial; submission of regulatory filings for LentiGlobin in Europe; and updates on SCD from the HGB-206 study. Clinical data for early-stage assets in oncology and rare diseases aren’t expected until at least 2019.

Price Action

At the time of publication, shares were trading down 3.87 percent at $199.42. 

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