Seeking Alpha
, IPOpremium (910 clicks)
Value, IPOs, long only
Profile| Send Message|
( followers)  

Based in Cambridge, MA, bluebird bio (NASDAQ:BLUE) scheduled a $75 million IPO with a market capitalization of $314 million at a price range mid-point of $15, for Wednesday, June 19, 2013.

Four other new IPOs are scheduled for the week of June 17th. The full IPO calendar is here.

  • S-1 filed June 4, 2013

  • Manager, Joint Managers: JPMorgan; BofA Merrill Lynch

  • Co Managers: Cowen; Canaccord Genuity; Wedbush PacGrow Life Sciences

Summary

BLUE is a biotech specializing in CAR T-cell therapy (see below). CAR T-cell therapy represents a promising, emerging approach to treating cancer. Blood is withdrawn from a patient and the T-cells are then extracted from a patient's blood. These cells are then genetically modified to recognize and attack cancer cells and then re-introduced into the patient's blood. The patient's genetically modified cells are intended to bind to and kill the target cancer cells.

In October 2012, BLUE was awarded a $9.3 million grant from the California Institute for Regenerative Medicine. The grant will be issued in quarterly installments and is expected to be utilized over a four-year period starting in the second half of 2013.

In March 2013, BLUE entered into a strategic collaboration with Celgene (NASDAQ:CELG) to discover, develop and commercialize novel, disease-altering gene therapies in oncology. The CELG collaboration has an initial term of three years. Celgene has made a $75 million up-front, non-refundable cash payment.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing March qtr

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

bluebird bio

$314

69.4

-12.1

2.5

2.6

24%

Glossary:

  • BLUE has an accumulated deficit of $80 million.

  • 2.5 times book value is low for a biotech, especially one with a strong endorsement and collaboration agreement with Celgene, which has a market capitalization of $50 billion.

Conclusion

Buy BLUE on the IPO. To put the above conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced earlier:

Business

BLUE is developing potentially transformative gene therapies for severe genetic and orphan diseases. BLUE has two clinical-stage programs in development for childhood cerebral adrenoleukodystrophy (CCALD) and beta-thalassemia/sickle cell disease.

Led by a management team with extensive industry experience, bluebird bio is privately-held and backed by top-tier life sciences investors. Operations are located in Cambridge, Mass., San Francisco, Calif., and Paris, France.

Celgene Collaboration

On March 21, 2013, BLUE announced a global strategic collaboration with Celgene, $50 billion market capitalization, to advance gene therapy in oncology (cancer).

The collaboration will focus on applying gene therapy technology to genetically modify a patient's own T-cells, known as chimeric antigen receptor (CAR) T-cells, to target and destroy cancer cells.

The multi-year research and development collaboration has the potential to lead to the development and commercialization of multiple CAR T-cell products. Celgene has an option to license any products resulting from the collaboration after the completion of a Phase 1 clinical study for each such product. Bluebird bio will be responsible for research and development activity through Phase 1 studies.

Additionally, Celgene has also entered into a separate strategic collaboration in the CAR T-cell field with the Center for Cell and Gene Therapy at Baylor College of Medicine, Texas Children's Hospital and The Methodist Hospital, Houston, led by Malcolm Brenner, M.D., Ph.D., professor, Department of Molecular and Human Genetics and the director, Center for Cell and Gene Therapy. BLUE, Celgene and Dr. Brenner's team will work collaboratively to advance and develop existing and new products and programs in the CAR T-cell field.

Quote From Celgene's R&D President

"The genetic manipulation of autologous T-cells is a new frontier in oncology, one that shows early promise in emerging clinical trials," said Tom Daniel, president, research & early development at Celgene. "We see strong prospects for this collaboration between Celgene, bluebird bio and Baylor College of Medicine's experienced leaders in this emerging field, led by Dr. Brenner, to advance this innovative approach to intractable problems in oncology."

Quote From BLUE's CEO

"We believe that our recent advances in the industrialization of our gene therapy platform will drive improvements in the potency, purity, efficiency and scalability of our lentiviral gene therapy programs. These advances provide us with an opportunity to apply our platform, intellectual property and know-how to the development of additional product candidates in indications such as CAR T-cells for cancer," stated Nick Leschly, CEO of bluebird bio. "Celgene is a global leader in oncology and, combined with Baylor's expertise in the CAR T-cell field, we have created a great opportunity to drive innovation in a new and exciting area."

Financial Terms

Financial terms of the agreement include an upfront payment and up to $225 million per product in potential option fees and clinical and regulatory milestones. BLUE also has the right to participate in the development and commercialization of any licensed products resulting from the collaboration through a 50/50 co-development and profit share in the United States in exchange for a reduction of milestones. Royalties would also be paid in regions where there is no profit share including in the United States if BLUE declines to exercise co-development and profit sharing rights.

The gene therapy products currently in clinical development at BLUE for the treatment of childhood cerebral adrenoleukodystrophy, beta-thalassemia and sickle cell disease are independent of this collaboration.

About CAR T-Cell Therapy

CAR T-cell therapy represents a promising, emerging approach to treating cancer. Blood is withdrawn from a patient and the T-cells are then extracted from a patient's blood. These cells are then genetically modified to recognize and attack cancer cells and then re-introduced into the patient's blood. The patient's genetically modified cells are intended to bind to and kill the target cancer cells.

Clinical Trials

BLUE and its scientific collaborators have generated what BLUE believes is human proof-of-concept data for its gene therapy platform in two underserved diseases, each of which has been granted orphan drug status by U.S. and European regulatory authorities.

BLUE expects to initiate in late 2013 a Phase II/III clinical study of its most advanced product candidate, Lenti-D, to evaluate its safety and efficacy in subjects with childhood cerebral adrenoleukodystrophy, or CCALD, a rare, hereditary neurological disorder affecting young boys that is often fatal.

BLUE also expects to initiate in mid-2013 a Phase I/II clinical study in the United States and has initiated a Phase I/II clinical study in Europe of the next most advanced product candidate, LentiGlobin, to evaluate its safety and efficacy in subjects with ß-thalassemia major and, in the European clinical study, sickle cell disease, or SCD, which are rare, hereditary blood disorders that often lead to severe anemia and shortened lifespans.

Intellectual Property

BLUE has a patent portfolio of:

  • 176 patents or patent applications that BLUE owns or has exclusively in-licensed from academic institutions and third parties related to lentiviral vectors and vector systems;

  • 58 patents or patent applications that BLUE has non-exclusively in-licensed or optioned from academic institutions and third parties related to lentiviral vectors and vector systems;

  • 18 patents or patent applications that BLUE owns, including eight that are co-owned with MIT, related to vector manufacturing or production;

  • 7 patents or patent applications that have been non-exclusively in-licensed from academic institutions and third parties related to vector manufacturing or production; and

  • 12 patents or patent applications that BLUE owns or has exclusively in-licensed from academic institutions and third parties related to therapeutic cellular products.

Competition

BLUE has competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions.

Some of the pharmaceutical and biotechnology companies BLUE expects to compete with include GlaxoSmithKline plc (NYSE:GSK), Sangamo BioSciences Inc. (NASDAQ:SGMO), HemaQuest Pharmaceuticals, Inc., Merck & Co., Inc. (NYSE:MRK), Novartis AG (NYSE:NVS) and GlycoMimetics Inc. In addition, many universities and private and public research institutes are active in BLUE's target disease areas.

5% Pre-IPO Stockholders

  • Third Rock Ventures, L.P., 28%

  • TVM V Life Science Ventures GmbH & Co. KG, 14%

  • Entities affiliated with Fidelity Investments, 12%

  • Entities affiliated with Capital Research and Management Company, 9%

  • Coöperative AAC LS U.A. (Forbion), 7%

Disclaimer: This BLUE IPO report is based on a reading and analysis of BLUE's S-1A filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Bluebird Bio