2seventy Bio's Cost Cuts Prudent But Analyst Says It Induces Lower Confidence In Lead Product

Guggenheim Partners downgraded 2seventy Bio Inc TSVT to Neutral from Buy and removed the price target.

On Tuesday, 2seventy Bio announced restructuring its business operations and research and development model to reduce costs.

Approximately 40% workforce reduction combined with related actions expected to achieve over $130 million in savings in 2024-2025, with a projected cash runway into at least 2026.

CEO Nick Leschly announces plans to step down and transition to Chairman of the Board of Directors.

Based on an anticipated decline in Abecma sales in Q3, U.S. revenue for full-year 2023 for Abecma could be lower than the previously projected $470-$570 million range.

Although TSVT has reaffirmed expectations that the Abecma joint venture will generate positive cash flow this year and the next, Guggenheim writes that the visibility into immediate upward potential is constrained. 

This limitation stems from a recent manufacturing pause for maintenance and the escalating competition from other BCMA-targeted agents, as indicated by management's remarks.

Simultaneously, substantial operating expenses persist, heightening the risk of potential future dilutive financing activities without significant pipeline catalysts. TSVT remains committed to supporting Phase I studies for bbT369 and SC-DARIC33, along with programs concentrating on solid tumors (MAGE-A4, MUC-16, and a newly revealed program in partnership with JW Therapeutics. Updates on these initiatives are anticipated in 2024-25.

Price Action: TSVT shares are down 8.5% at $3.80 on the last check Wednesday.