The BLUE And The BOLD; Analyst Suggests Pair Trade Ahead Of Year-End Catalysts

Evercore ISI on Monday outlined a pair trade in the biotech sector, with the firm upgrading shares of bluebird bio Inc BLUE, while simultaneously downgrading those of Audentes Therapeutics Inc BOLD.

The firm upgraded shares of Bluebird from In-Line to Outperform, while it downgraded shares of Audentes Therapeutics from Outperform to In-Line. The price target on Bluebird goes from $102 to $152 and that of Audentes is increased from $23 to $29.

At time of writing, Bluebird shares were up 4.44 percent to $137.55. Audentes shares were sliding 10.51 percent to $25.12.

Bluebird Potential For Outperformance Around ASH And Beyond

Analyst Josh Schimmer attributed the upgrade of Bluebird to its view that the shares have a favorable risk/reward setup heading into the American Society of Hematology's annual meeting in December and following through to European Hematology Association annual congress next year in June.

The analyst believes the company's shares have enough value drivers to drive outperformance, with a steady flow of incrementally positive news. The analyst sees LentiGlobin for sickle cell/beta-thal, Lenti-D for childhood cerebral adrenoleukodystrophy, $1.2 billion in cash and a rapidly moving BCMA CAR-T program, potentially giving the company a first-mover advantage as positives for the share.

Evercore ISI believes Bluebird is now on the right track for a strong clinical profile to emerge at ASH and over the following 12 months. The firm expects LentiGlobin's potential to be further improved by the addition of Mozobil stem cell mobilization next year.

Audentes Downgraded On Valuation

Meanwhile, Audentes' downgrade was attributed primarily to valuation, as the stock has run up nearly 50 percent since August and its valuation at nearly $750 million market cap.

With upcoming preliminary data for its gene therapy in X-linked Myotubular Myopathy and CNJ, Evercore ISI thinks the shares are nearly fully valued to reflect success, considering the ultra-rare nature of these diseases.