Blueprint Medicines: Conviction In Precision Oncology

|
About: Blueprint Medicines Corporation (BPMC), Includes: AZN, CLDX, DCPH, EXEL, LOXO, NVS, PFE, XNCR
by: Clover Biotech Research
Summary

Blueprint Medicines (BPMC) is a targeted-oncology play aiming to extend the lives of patients with gastrointestinal stromal tumors (GIST) and other genetically-relevant cancers.

Lead drug, Avapritinib, is a clear winner in 4th-line & D842V mutant PDGFRA GIST.

Avapritinib also provides substantial therapeutic differentiation in advanced systemic mastocytosis.

BLU-667 is primed to be medically-relevant for thousands of RET-mutated cancers (e.g. NSCLC & MTC).

A sum-of-parts valuation prices BPMC at $115/share. Blueprint Medicines is a conviction buy during their transition into a commercial-stage company.

Note: This article was first revealed to subscribers to my exclusive marketplace, The Formula, in February when shares of Blueprint were trading < $80.

PT Relevant Events
$115
  • FDA-approval in 4th-line & PDGFRA GISTs (2019-2020); successful market launch (2020)
  • Additional data in GIST
  • NSCLC combination data
  • MTC data and FDA-approval (2020-2021)

Preface

Documents: 10-Q | Company Slides

Shares: 48,853,933 | PPS: $100 | Market Cap: $4.8B | Enterprise Value:~$4.4B | Cash/Investments: ~$400M | Cash Runway: into 2021

BPMC Idea Slides

Pipeline Overview

1. Avapritinib - KIT and PDGFRA inhibitor

  • GIST - 2nd line (late-stage trial planned in 1H 2019)
  • GIST - 3rd line (NDA planned in 2020)
  • GIST - 4th line (NDA planned in 1H 2019)
  • Advanced PDGFRA Exon 18 mutant GIST (NDA planned in 1H 2019)
  • ASM (NDA planned in 2020)

2. BLU-667 - RET and EGRF inhibitor

  • Advanced EGFR-mutant NSCLC (+osimertinib) (early-stage trial planned in 1H 2019)
  • Advanced 2L RET-mutant MTC (NDA planned 1H 2020)

3. BLU-554 - FGFR4

  • Advanced HCC (+CS-1001) (early-stage trial planned in 2H 2019)

The following thesis will address Blueprint's two main assets, avapritinib & BLU-667.

Avapritinib

Avapritinib (BLU-285) is an investigational drug owned by Blueprint Medicines (BPMC) with the exceptions of Mainland China, Hong Kong, Macau and Taiwan. Avapritinib is an inhibitor of a few protein kinase targets.

Human Kinome

Source: Blueprint Medicines

Protein kinases regulate complex processes in our cells. It is well-known that alterations in kinases can lead to cancer.

The complexity and sophistication of the system implies its vulnerability. Alterations in functions of these enzymes may launch series of pathological changes within the cell and as a result cause diseases. Protein kinases have been shown to be involved in various pathological processes, first of all malignancies.

Source: Folia Biologica

Subsequently, kinase inhibitors are being increasingly developed as cancer treatments.

Primary targets for Avapritinib include KIT and PDGFR kinases.

Figure 1: "The size of the circle indicates binding potency. The bigger the circle, the more potently the compound binds to the particular kinase" (Source: Blueprint Medicines).

KIT kinases

This protein is a type 3 transmembrane receptor for MGF (mast cell growth factor, also known as stem cell factor). Mutations in this gene are associated with gastrointestinal stromal tumors, mast cell disease, acute myelogenous lukemia, and piebaldism.

PDGFR kinases

PDGF play minimum three roles that may lead to tumor development, including: 1. autocrine stimulation of cancer cells; 2. stimulation of angiogenesis; 3. control of tumor interstitial pressure. Blockade of autocrine stimulation of tumor growth by blocking PDGFR in cell lines and xenograft models showed consistent positive results in dermatofibrosarcoma protuberans, prostate cancer, ovarian cancer and gliomas

GIST

Gastrointestinal stromal tumors (GISTs) are the most common mesenchymal tumors of the gastrointestinal tract and have gained considerable research and treatment interest, especially in the last two decades. GISTs are driven by mutations commonly found in the KIT gene and less commonly in the platelet-derived growth factor receptor alpha gene, BRAF gene and succinate dehydrogenase gene.

Source: World Journal of Gastroenterology (WJG)

The following alterations, or mutations, in these kinases are seen in patients with GIST:

Source: WJG

GIST prevalence

It is estimated that there are ~5,000 new cases of GIST per year in the US (~7,500 in the EU) with a distribution of risk (very low, low, intermediate, and high risk):

Treatment algorithm

Treatment of GIST depends on the state of the disease (localized vs. metastatic) and the distribution of risk (very low, low, intermediate, or high risks).

It is estimated that anywhere from 15%-47% have metastatic disease. For simplicity sake, we'll settle at 33% (4,250 EU + US patients). That leaves the remaining 66% with localized disease.

Here is the treatment algorithm for GIST:

Source: WJG

~60% of patients with localized/resectable GIST (8,250 total EU + US patients) have successful surgical resection (absence of reoccurrence). High-risk patients with localized GIST will be on adjuvant therapy following surgical resection (33%, or, 2,722 EU + US patients). This leaves us with 2,210 patients requiring pharmacological intervention. Plus the patients with metastatic disease (total addressable market) equals 9,182 EU + US patients.

First-line treatment

Total addressable population (estimated) = 9,182

Imatinib (NVS), priced ~$108K/year, is utilized as standard first-line regimen for high-risk localized disease (for 3 years), metastatic disease (until progression or intolerance), and following unsuccessful surgical resection.

Source: Blueprint Medicines

Good read: Imatinib pricing/history

It is estimated that ~50% of patients develop an acquired resistance to imatinib via "additional mutations in the KIT kinase domain".

Second-line treatment

Total addressable population (estimated) = 4,600

Sunitinib (PFE), priced ~$148K/year, is utilized as second-line treatment following imatinib failure.

Source: Blueprint Medicines

~7% of patients have an adequate clinical response (partial responses) to sunitinib. The remaining will require third-line treatment.

Third-line treatment

Total addressable population (estimated) = 4,140

Regorafenib (Bayer), priced ~$150K/year, is utilized as third-line treatment following sunitinib failure.

Source: Blueprint Medicines

~5% of patients have an adequate clinical response to regorafenib. The remaining will require fourth-line treatment.

Fourth-line treatment

Total addressable population (estimated) = 3,933

There are no FDA-approved treatments for fourth-line GIST. Physicians will, typically, rechallenge patients with imatinib or prescribe palliative (for purposes of end-of-life comfort) chemotherapy.

Peripheral competition for GIST

If avapritinib receives marketing approval for third line advanced GIST, it will face competition from Bayer AG’s regorafenib, and if avapritinib receives marketing approval for second line advanced GIST, it will face competition from Pfizer Inc.’s sunitinib. In addition, if avapritinib receives marketing approval for advanced SM, GIST and/or for GIST patients with the PDGFRα D842V mutation, it may face competition from other drug candidates in development for these indications, including drug candidates in development by AB Science S.A., ARIAD Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited, AROG Pharmaceuticals, Inc., Celldex Therapeutics, Inc., Deciphera Pharmaceuticals, LLC and Plexxikon Inc., a wholly-owned subsidiary of Daiichi Sankyo Company, Limited.

Source: Blueprint

  • Arog is clinically (phase 3) targeting a specific mutation [D842V] in the PDGFRA gene, so their respective market will be limited to ~5% of total GIST patients. However, they are seeking a key indication of Blueprint's. Their data appears far from competitive. A phase 2 trial in 20 patients revealed 2 of 16 patients experiencing a partial response and 3 of 16 experiencing stable disease. Now, these patients were heavily pretreated with prior GIST agents but had progressed nonetheless. It's difficult to truly compare this dataset with Blueprint's as there are many caveats, but, as we'll discuss, it'll be hard to compete with Blueprint's data. Arog is currently undergoing a phase 3 trial in these patients.
  • Plexxikon's reach in GIST also appears limited and they are just in a phase 1/2 trial.
  • Celldex (CLDX) recently updated their plans with their GIST candidate: "IND enabling studies underway with CDX-0159, our anti-KIT antibody, with the aim of adding it as a new clinical program in 2019."
  • Takeda has reported lukewarm phase 2 data in GIST. Their drug, ponatinib, is currently undergoing a phase 2 trial. While they will enroll nearly all kinds of GIST patients (following first-line failure), Takeda seems focused on KIT Exon 13 Mutation, which composes of 1-3% of all total GIST patients.
  • Bristol-Myers isn't doing much with their GIST drug. They trialed it in first-line and second/third-line GIST, but walked away with subpar results:

Dasatinib was active in a subset of patients with advanced gastrointestinal stromal tumors based on objective tumor response and a 6-month PFS rate that was substantially higher than previously seen for nilotinib, placebo and best supportive care, but was not associated with a 6-month PFS rate of more than 30%,” the researchers wrote. “Further studies should explore whether activated SRC is a prognostic biomarker of more indolent disease or is a predictive biomarker of response to tyrosine kinase therapy.

  • About a year ago, Xencor (XNCR) initiated a phase 1 trial in GIST. Their drug is a bit different than the others I've discussed in that it targets somatostatin receptor 2, in which ~85% of GIST patients express.

All in all, because the above companies are (1) targeting limited GIST subsets (Arog, Plexxikon), (2) have lukewarm data (BMS, Takeda, Arog), and/or (3) are in phase 1 development (Plexxikon, Xencor, Celldex), the only "competition" I will address in more detail is Deciphera Pharmaceuticals (DCPH).

Deciphera's ripretinib for GIST (Part 2)

Source: Blueprint Medicines

Early-phase data for Ripretinib in second-, third-, & fourth-line GIST

Here are some key takeaways:

  • ORR (overall response rates) compare favorably to existing treatments for second- (18% vs. ~7% for sunitinib) , third- (24% vs. ~5% for regorafenib), and fourth-line GIST.

Source: Deciphera Pharmaceuticals

  • 2618 is well-tolerated with limited Grade 3/4 (requiring prompt treatment/death) events:

Source: Deciphera Pharmaceuticals

  • Progression-free survival (definition: "The length of time during and after the treatment of a disease, such as cancer, that a patient lives with the disease but it does not get worse") for patients on 2618 compare favorably to existing treatments:

Source: Deciphera Pharmaceuticals

Ongoing pivotal trials in GIST

Source: Deciphera Pharmaceuticals

Source: Deciphera Pharmaceuticals

The Blueprint For GIST

PDGFRa-mutated GIST

Avapritinib is a highly-potent drug for PDGFRa inhibition.

We have conducted comprehensive pre-clinical experiments to characterize the potency and selectivity of avapritinib. Avapritinib potently inhibits PDGFRα D842V in vitro (IC50 = 0.24 nM). In contrast, imatinib inhibits PDGFRα D842V at least 3,000‑fold less potently (IC50 = 759 nM). In a cellular model driven by an activated PDGFRα D842V mutant protein, avapritinib potently inhibits signaling of the oncogenic PDGFRα mutant protein as measured by inhibition of PDGFRα autophosphorylation (IC50 = 30 nM). By comparison, imatinib shows at least 100‑fold lower potency in the cellular model (IC50 = 3,145 nM).

Source: Blueprint

Preliminary efficacy data for GIST patients with PDGFRa mutations were strong:

By mRECIST 1.1 criteria, one patient had a CR (pending confirmation), 21 patients had a PR (18 confirmed, three pending confirmation), and nine patients had SD, representing an ORR of 71% and a DCR of 100% (...) Median PFS was not reached, and 12‑month PFS was estimated to be 78%.

Source: Blueprint

Blueprint, later, released updated data last November:

Source: Blueprint

The responses compare favorably to historical data.

In contrast, historical data showed a zero percent ORR and median PFS of 2.8 months in patients with PDGFRα D842V‑driven GIST treated with imatinib.

Source: Blueprint

Importantly, the drug was well-tolerated, with a limited amount of Grade 3/4 events and discontinuations due to adverse events (8.7%):

Source: Blueprint

Based on the robust data, Blueprint intends to submit a NDA for Advanced PDGFRA Exon 18 mutant GIST in the first half of this year.

If approved, Blueprint estimates ~425 patients with PDGFRA Exon 18 mutations will be appropriate candidates for avapritinib. Assuming a high penetration rate of 75% and a price ~$150K, this nets ~$50M in peak annual sales.

4th-line GIST

4th-line GIST is, historically, incredibly difficult to treat with response rates well into the single digits. Avapritinib, however, procured an ORR of 20%:

Source: Blueprint

Bear in mind, there are no FDA-approved treatments for this population. Blueprint intends to submit a NDA for 4th line GIST in the first half of this year. Assuming a penetration rate of 75% in 6,000 available candidates at a price of $150K, this nets ~$675M in peak annual sales.

Combined with PDGFRA Exon 18 mutations, Blueprint is expected to secure two indications in markets worth $725M.

Opportunities in 4th-line and PDGFRa-mutated GIST + cash-on-hand justify floor valuation

Considering Blueprint's current enterprise value (~$4.4B) and the high-end of the conservative annual estimates in 4th-line and PDGFRa-mutated GIST ($640M) with a multiple of 4, these two opportunities alone plus cash-on-hand, arguably, justify Blueprint's valuation ($640M x 4 = $2.56B).

Avapritinib intellectual property

Avapritinib is wholly-owned and blessed with extended patent life:

The intellectual property portfolio for our avapritinib program contains patent applications directed to compositions of matter for avapritinib and analogs, compositions of matter for KIT inhibitors with different compound families, as well as methods of use for these novel compounds. As of February 15, 2018, we owned five issued US patents, four pending U.S. patent applications, 36 pending foreign patent applications in a number of jurisdictions, including Argentina, Australia, Bolivia, Brazil, Canada, China, the European Union, Israel, India, Japan, South Korea, Mexico New Zealand, Pakistan, Russia, South Africa, Taiwan and Venezuela, one pending PCT patent application and two U.S. provisional applications directed to our KIT and PDGFRα program, including avapritinib. Any U.S. or ex-U.S. patents issuing from the pending applications covering avapritinib will have a statutory expiration date of October 2034. Patent term adjustments or patent term extensions could result in later expiration dates.

Source: Blueprint

Comparing Blueprint & Deciphera in fourth-line GIST

To put it simply, Blueprint's medicine procured an ORR of 20%, over twice that of Deciphera's (9%). Unfortunately, data is far more complicated than just comparing two numbers. Here are some caveats to consider:

  • Blueprint's data appears more rigorously reviewed than does Deciphera's in that Blueprint's numbers are "centrally reviewed" as opposed to "investigator reviewed" like Deciphera's. Data that is centrally reviewed is less likely to be subject to bias and is, therefore, considered the "hallmark" of data review. However, large-scale analyses have yet to pinpoint a significant difference between the two (read).
  • Deciphera's drug appears more tolerable & safe than does Blueprint's.
  • In Blueprint's phase 1 "Navigator" trial in patients with advanced GIST, "43 patients discontinued treatment, with 40 patients due to progressive disease and three patients who withdrew consent. Among all 116 enrolled patients, 67 remained on treatment as of the data cutoff date."
  • Similarly, Deciphera saw similar discontinuation rates: "Of these patients, 67% (38 of 57) remained active on study. Of the 19 patients who were off study, 47% (9 of 19) discontinued due to PD per RECIST and 53% (10 of 19) for a variety of other reasons."

GIST (Summary)

Blueprint's data in fourth-line and PDGFRa GISTs compare favorably to Deciphera's. Other competition either lags significantly behind or has procured lukewarm data to date. Blueprint should, additionally, benefit from being first-to-market in both indications. Based on the information above, I am confident that Blueprint will be a clear victor and leader for these two indications.

Advanced Systemic Mastocytosis

Avapritinib/BLU‐285: is a small molecule kinase inhibitor that selectively inhibits activation‐loop mutants of KIT, including KITD816V, at subnanomolar concentrations. Avapritinib also inhibits the analogous mutation in PDGFRA, namely D842V, seen in imatinib‐refractory GISTs. The drug appears highly selective with limited inhibitory activity outside of KIT and PDGFRA kinases, and has shown therapeutic activity in murine models of mastocytosis. Interim results from a Phase 1 study (Explorer; NCT02561988) in adult patients with advanced SM enrolled a total 52 patients (dose escalation 32 patients and dose expansion 20 patients). The recommended Phase 2 dose was 300 mg/day. After a median treatment duration of 14 months (dose escalation) and 5 months (dose expansion), 80% remained on treatment. Only 23 of 52 (...) patients were evaluable for response by study specified criteria. The ORR and complete response (CR/CRh) rates were 83%/17%; responses were seen across all SM subtypes and median time to resolution of at least one “C” finding was 35 days. There was evidence of broad anti‐neoplastic MC activity; 81% of evaluable patients had ≥50% reduction in both BM MC and serum tryptase level; 58% had complete clearance of neoplastic BM MC, 66% had reduction of serum tryptase level to <20 ng/mL, 47% had normalization of spleen size and 88% had ≥50% decrease in KITD816V mutation level in BM. Adverse events ≥3 were reported in 54% of patients and 56% required dose reductions for AE's. Ten patients discontinued from the study, 4 due to treatment‐related AE's. A follow up Phase 2 study (Pathfinder; NCT03580655) is currently recruiting patients with advanced SM and a Phase 2 study (Pioneer; NCT03731260) is planned for patients with ISM/SSM.

Source: Annual Clinical Updates In Hematological Malignancies

It is estimated that 95% of patients with advanced systemic mastocytosis [ASM] have KIT D816V mutation, making Avapritinib an appropriate therapeutic candidate.

Midostaurin (NVS) is FDA-approved for ASM after procuring overall response rates between 69%-75%. However, Avapritinib appears to have superior efficacy (83%ORR) and tolerability (22% discontinuation rate due to adverse events for midostaurin vs. 4%).

Improvements in both efficacy & safety can be attributed to Avapritinib's target-specific profile for KIT D816V:

Source: Blueprint

Avapritinib was awarded with Breakthrough Therapy Designation for this indication, suggesting the FDA believes avapritinib provides "substantial improvement over existing therapies”. Furthermore, the current treatment algorithm encourages ASM patients to pursue clinical trials over midostaurin:

Source: Annual Clinical Updates In Hematological Malignancies

Valuation

There are ~2,500 advanced systemic mastocystosis patients. Priced at $150k/treatment with 50% penetration = ~$185M in peak annual sales.

BLU-667

Source: Blueprint

An orally bioavailable selective inhibitor of mutant forms of and fusion products involving the proto-oncogene receptor tyrosine kinase RET, with potential antineoplastic activity. Upon administration, BLU-667 binds to and targets various RET mutants and RET-containing fusion product. RET gene mutations and translocations result in the upregulation and/or activation of RET tyrosine kinase activity in various cancer cell types; dysregulation of RET activity plays a key role in the development and regression of these cancers.

Source: cancer.gov

Advanced 2L RET-mutant MTC

Medullary thyroid cancer [MTC], a rare disease, accounts for < 10% of all thyroid cancers. MTC is related to a key genetic mutation involving RET and is often passed on through generations.

Blueprint estimates there are ~1,300 patients, within the major markets, with MTC.

Current treatment involves thyroid resection. The disease may progress beyond that, requiring pharmacological treatment.

Pharmacological treatment

The 10-year overall survival rate in unselected patients with MTC is approximately 75%, but it decreases to 40% or less in patients with locally advanced or metastatic disease. Neither radiotherapy nor chemotherapy has demonstrated durable objective responses in patients with advanced MTC.

Source: JCO

Vandetanib (AZN) is a once-daily oral treatment approved for treatment of asymptomatic or progressive medullary thyroid cancer in patients with unresectable locally advanced or metastatic disease. Vandetanib selectively targets RET, VEGFR, and EGFR.

Of the 33 patients with hereditary MTC, 32 had a documented RET germline mutation before study entry, and of the 28 receiving vandetanib, 13 (46.4%) had an objective response.

Source: JCO

Furthermore, the drug was well-tolerated and provided statistically significant increases in progression free survival.

Source: JCO

Cabozantinib (EXEL) is approved for the treatment of progressive, metastatic medullary thyroid cancer. "Cabozantinib is a TKI that targets three relevant pathways in MTC: MET, VEGFR2, and RET."

RET mutation–positive and -negative subgroups also demonstrated similar ORRs for cabozantinib treatment (32% and 25%, respectively).

Source: JCO

Like vandetanib, cabozantinib provided significant improvements in progression free survival amongst all MTC patients. The drug was well-tolerated.

Source: JCO

BLU-667

While both cabozantinib and vandetanib are nice advancements in the treatment of MTC, BLU-667 may provide differentiation:

Currently available MKIs with RET activity (e.g., cabozantinib, vandetanib) are characterized by activity against multiple kinase targets, most notably the receptor tyrosine kinase VEGFR-2, which regulates angiogenesis and permeability of the vascular endothelium (30). Pharmacologic inhibition of VEGFR-2 activity can result in clinically relevant dose limiting toxicities such as hypertension, thrombosis, and hemorrhage. We therefore designed BLU-667 to have enhanced activity and selectivity for RET versus VEGFR-2. Whereas cabozantinib, vandetanib, and RXDX-105 displayed little to no selectivity for RET over VEGFR-2, BLU-667 was 88-fold more potent against RET.

Source: AACR

Blueprint is currently enrolling patients with cancers most associated with RET mutations.

Source: clinicaltrials.gov

Preliminary data has been promising in MTC.

Source: Blueprint

18/35 MTC patients saw partial responses; good for an ORR of 51%.

Importantly, higher doses were associated with deepening responses. Doses exceeding 300 mg saw ORRs exceeding 60%:

Source: Blueprint

These data suggest obvious advantages over current therapies.

Furthermore, BLU-667 appears far more tolerable than cabozantinib and vandetanib in this indication.

Source: Blueprint

LOXO-292

LOXO-292 is an oral and selective investigational drug in clinical development for the treatment of patients with cancers that harbor abnormalities in the rearranged during transfection (...) kinase.

Source: Loxo Oncology

Blueprint is not alone in RET-inhibition. Recently acquired Loxo Oncology is developing LOXO-292 for similar indications.

Data in RET-associated MTC is similar to Blueprint's:

The overall response rate was 59% (17/29) (95% CI: 39%-77%) and the confirmed overall response rate was 56% (15/27) (95% CI: 35%-75%).

Source: Loxo Oncology

Efficacy between 292 and 667 appear quite similar. Both drugs are in phase 1 trials, so to attribute any differentiation between the two is all the more difficult.

However, Loxo's drug is astonishingly well-tolerated.

Source: Loxo Oncology

Valuation

Both Blueprint's & Loxo's targeted drugs provide huge therapeutic differentiation over existing treatments. I anticipate that competition will be fierce for this indication.

Assuming Blueprint nabs 350 patients at $150K, this nets ~$55M in peak annual sales. I feel this is a fair estimate.

NSCLC

RET mutations are seen in ~2% of NSCLCs. Currently, there are no FDA-approved treatments for RET-mutated NSCLC. Multi-targeted drugs have been tested in these patients, but without much success.

(...) several multi-targeted RET inhibitors (cabozantinib, lenvatinib, and vandetanib) have been approved for medullary thyroid cancer, which commonly harbors activating RET point mutations (Mulligan, 2014). In phase 2 clinical studies, cabozatinib and vandetanib elicited ORRs of 28% and 18%-47%, respectively, in NSCLC patients (Drilon, Rekhtman, et al., 2016; Lee et al., 2017; Yoh et al., 2017). As these multi-kinase inhibitors were originally developed to target other kinases and repurposed to treat RETrearranged NSCLCs, they are associated with significant toxicity and lower ORR than the personalized therapies used for other molecular subsets (e.g. ALK, ROS1, EGFR).

Source: Pharmacology & Therapeutics

Targeted therapies like Blueprint's and Loxo's provide substantial therapeutic differentiation & opportunity:

Recently, multiple selective RET inhibitors have entered clinical trials. The selectivity for RET combined with the sparing of VEGFR is expected to significantly improve efficacy and tolerability over the prior multi-targeted kinase inhibitors. BLU-667 is a RET-selective inhibitor developed to target RET mutations—including gatekeeper mutations— as well as the most common RET fusions. BLU-667 has increased potency against RET alterations in preclinical models compared to multikinase inhibitors (Subbiah et al., 2018). In a preliminary analysis of an ongoing phase 1 study which included 19 patients with NSCLC with RET fusions, an ORR of 50% was observed among 14 evaluable NSCLC patients, including heavily pretreated patients who had received prior RET-targeting agents (Subbiah et al., 2018 AACR annual meeting). Similarly, another potent and selective RET inhibitor, LOXO-292, has demonstrated impressive activity and tolerability in a phase I study, with an ORR of 65% in RET-rearranged NSCLC, as well as CNS responses in several patients.

Source: Pharmacology & Therapeutics

Valuation

On the surface it appears that Loxo has a superior drug for this indication (ORR of 65%). It is, however, too early to get a grasp on which drug is “better”. Because of this & the likelihood for a very competitive indication, I will set a 25% penetration for 667. It is estimated that ~7,500 patients will have RET-mutated NSCLC. $150k/treatment x 1,875 patients = ~$225M in peak annual sales.

Sum-Of-Parts Valuation

Indication Peak Annual Revenue Multiple Value PPS
Cash $494M $10/share
GIST (BLU-285) $725M 4 $2.9B $65/share
ASM (BLU-285) $185M 4 $740M $15/share
NSCLC (...) $225M 4 $900M $20/share
MTC (...) $55M 4 $220M $5/share
TOTAL $115

Conviction Idea Summary

Blueprint's lead drug, BLU-285, has a clear competitive advantage over competition for its two main indications, GIST & ASM. While I value both indications just short of $1B in peak annual revenue, this is a drug that can achieve blockbuster status. It will certainly create sustained positive cash flowfor Blueprint within 3-5 years.

BLU-667 represents a shift in oncologic medicine towards precision medicine. Blueprint is additionally working on making it easier for patients to be genetically profiled before they seek treatment. Although early, BLU-667 has already demonstrated significant therapeutic differentiation in RET-mutated cancers. Unlike BLU-285, BLU-667 will, undoubtably, face fierce competitive pressure from the likes of Loxo Oncology. However, valuing 667 at $25/share is quite conservative & accounts for competitive concerns.

Risks & Limitations

Please familiarize yourself with the risks involved in a Blueprint investment before investing. All relevant risks can be read on their latest SEC filing, provided within this article. I will highlight some risks:

  • Blueprint's inability to obtain FDA-approval in pursued indications
  • The FDA requiring additional data before approving a drug
  • Blueprint needing to dilute shareholders to continue running as a business
  • Blueprint's competition (DCPH, LOXO) producing better data or more revenue than Blueprint (NVS)
  • Any of Blueprint's drugs failing/halting in the clinic due to safety/efficacy
  • Outside factors influencing Blueprint's valuation (politics, law, healthcare, wars, recession, weather)

Limitations:

  • I have not covered all of Blueprint's opportunities (drugs & indications)
  • The sum-of-parts valuation is very simplistic, & perhaps to a fault of inaccuracy
  • Comparing datasets from two different trials/drugs is a very difficult & complex task. I have presented it in a way that is likely too simplistic.

Disclaimer: The intention of this article is to provide insight, not investment advice. While the information provided in this article is intended to be factual, there is no guarantee and prospect investors are encouraged to do their own fact-checking and research before investing in a company. One must also consider one's own financial standings, risk tolerance, portfolio diversification, etc. before making a decision to buy shares in a company. Many of my articles detail biotechnology companies with little or no revenue. These stocks are, therefore, speculative and volatile. Even when prospects seem promising, there is no predicting the future. Losses incurred may be significant.

Disclosure: I am/we are long BPMC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.