Evercore ISI Says Bluebird Bio Has Path To Commercialization, Madrigal Pharma Outpaced By Mid-Cap Alternatives

Shares of bluebird bio Inc BLUE — a clinical-stage biopharmaceutical company focused on bringing to market advanced products based on the potential of gene therapy — have been highly volatile, but the company has a "clear path" toward commercialization, according to Evercore ISI.

The Analyst

Evercore ISI's Josh Schimmer on June 19 upgraded bluebird from In-line to Outperform with a price target lifted from $175 to $230.

The analyst downgraded Madrigal Pharmaceuticals Inc MDGL from Outperform to In-Line with an unchanged $300 price target.

Bluebird's March Toward Commercialization

Bluebird's recent updates related to its LentiGlobin investigational gene therapy in patients with sickle cell disease and the separate myeloma CAR-T therapy bb2121 with its partner Celgene Corporation CELG represent an "important positive inflection" for the company, Schimmer said in the upgrade note.

Granted, there are still "existential threats down the road" for bluebird, but the biotech has a clear path toward commercialization, the analyst said.

Bluebird likely holds an advantage over most competitor CAR-T updates, as its bb2121 has a first-mover advantage and a robust partner in Celgene, Schimmer said. LentiGlobin also faces competition but is poised to gain regulatory approval and commercialization, he said. 

Related Link: Janney Says Bluebird's Therapies Are 'Encouraging,' But Stock Is Fairly Valued

Madrigal: 'Quite A Ride'

Madrigal, a clinical-stage biopharmaceutical company pursuing novel therapeutics that target a specific thyroid hormone receptor, The stock traded below $20 per share in 2017 but has since experienced "quite a ride," as it is near the $300 level amid a recent Bloomberg report the company is looking to sell itself, Schimmer said in a downgrade note.

Anything short of an acquisition or "massive" collaboration with a larger partner will likely fall short of investor expectations, the analyst said. Results from the company's Phase 2 MGL-3196 study were "encouraging," but the company faces "some unknowns" related to the long-term outlook of 3196, Schimmer said.

Madrigal is operating in a growing competitive landscape with a finite period of patent exclusivity, the analyst said.

Madrigal's story could improve, as the Phase 3 trial of 3196 will start in 2019, but 12-15 months are needed for enrollment followed by another year for results to be released, according to Evercore.

Until then, there is no "real incremental reason" to buy Madrigal stock at around $300 per share over compelling alternatives within the mid-cap space, Schimmer said.