Leerink Starts Coverage Of Genetic Medicine Stocks: 'We See Commercial Execution As Increasingly Driving Returns'

With more and more genetic medicine companies going commercial, Leerink turned its attention to the sector this week. 

The Analyst

Leerink’s Mani Foroohar initiated coverage of 10 genetic medicine companies with the following ratings and price targets:

• bluebird bio BLUE; Outperform; $145 price target.
• Alnylam Pharmaceuticals ALNY; Market Perform; $63 price target. 
• Wave Life Sciences WVE; Outperform; $61 price target. 
• Ionis Pharmaceuticals IONS; Market Perform; $50 price target. 
• REGENXBIO RGNX; Under Perform; $42 price target. 
Eidos Therapeutics EIDX; Outperform; $32 price target. 
• AVROBIO AVRO; Market Perform; $27 price target. 
• Dicerna Pharmaceuticals DRNA; Outperform; $24 price target. 
• Intellia Therapeutics NTLA; Outperform; $23 price target. 
• Rocket Pharmaceuticals RCKT; Outperform; $22 price target. 

The Thesis

"The genetic medicine sector is rich with companies developing drugs with the aim to treat — often with intent to definitively cure — conditions ranging from rare, severe inherited illnesses to some of the most common diagnoses in the developed world," Foroohar in a Tuesday note.  

Growth is evident in the genetic medicine portfolio Leerink has chosen, as Alnylam Pharmaceuticals and Ionis Pharmaceuticals transition into commercial-stage biotechnology companies, the analyst said. 

"With the majority of our coverage companies positioned for likely regulatory approval of independently marketed assets in the next three years, we see commercial execution as increasingly driving returns."

With more and more FDA guidance documents being released on cell and gene therapies, there is increased clarity on the path to approval that genetic companies have to take regarding clinical endpoints and early demonstration of manufacturing quality, Foroohar said. 

"With regulatory transparency and fast-moving science, companies in our coverage are developing some of the most exciting technology in health care today. These same forces open the door to disruptive innovation from new entrants, including private companies or others with equity securities too illiquid to be investable for many institutional investors."

A focus on end markets with natural barriers to entry and durable cash flow characteristics are a more effective method of risk mitigation for investors than "basket" diversification, according to Leerink. 

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