Bank of America on Reneo, bluebird bio

 Reneo Pharmaceuticals, a clinical-stage pharmaceutical company working on new treatments for rare genetic diseases. Reneo is focused on metabolic diseases, rare genetically-based disorders stemming from mitochondria, the energy production units of living cells. The company has two main research tracks, one on primary mitochondrial myopathies (PMM), and the other on long-chain fatty acid oxidation disorders (LC-FAOD).

These mitochondrial diseases are rare, difficult to treat at best, and currently have few or no effective treatment options. This makes them an open field for researchers like Reneo. The company has developed a new drug candidate, mavodelpar, which has potential to treat both PMM and LC-FAOD conditions, and the firm has initiated clinical trials on both tracks.

The leading track is the pivotal STRIDE study of mavodelpar in the treatment of adults with PMM. The company completed enrollment of the study during 1Q23, with 213 patients – surpassing the target enrollment of 200 patients. The company also has 100 patients enrolled in the STRIDE-AHEAD open label extension study, with more than 50 patients reaching the 6-month milestone in the clinical study. Topline results from this study are expected in 4Q23.

Also of note, Reneo received Fast Track designation from the FDA for mavodelpar, in the ‘genotype of long-chain fatty acid oxidation disorder (LC-FAOD).’ This is an important regulatory milestone in the development of new drugs for these rare diseases.

The promising prospects of mavodelpar caught the attention of Bank of America analyst Jason Zemansky, who finds the drug candidate’s impact on Reneo’s risk/reward profile to be highly favorable.

“In our view, lead asset mavodelpar’s upside has been overlooked by the Street ahead of its pivotal phase 2 readout—potentially leading to a first approval by YE24e/ early 2025e in Primary Mitochondrial Myopathy (PMM), with several additional indications poised to follow. Supported by positive commercial dynamics common in the rare/ orphan disease space (e.g., good pricing support, high unmet need, limited competition), we forecast an impressive launch trajectory with blockbuster potential – with a road to profitability as early as 2026e. Together with longer-term pipeline optionality, we see very attractive risk/reward for shares at current levels,” Zemansky opined.

To this end, Zemansky rates Reneo shares a Buy, and his $23 price target implies a robust 268% potential upside for the next 12 months. 

Bluebird Bio (BLUE)

The second BofA pick we’re looking at is Bluebird Bio, a clinical-stage biopharma taking its first steps toward commercialization. The company is working on new gene therapy treatments for rare genetic diseases – diseases that have chronic and highly negative impacts on the quality of life and have few or no effective treatments available. For gene therapy research firms, with their lead times measured in years and their high overheads, getting a drug to market is something of a ‘Holy Grail.’ Bluebird has achieved that and, in addition, has an active research pipeline.

Bluebird currently has three main tracks, featuring two recently approved drugs and one still undergoing clinical trials. The approved drugs are Skysona, a gene therapy treatment for early, active cerebral adrenoleukodystrophy (CALD), and Zynteglo, another gene therapy designed to treat the genetically based blood disorder beta-thalassemia. The third program is a drug candidate still in the clinic, lovotibeglogene autotemcel (also called lovo-cel), which is a new approach to gene therapy for the treatment of sickle cell disease.

On the commercialization side, Zynteglo and Skysona received their FDA approvals for use in August and September of last year. In Q1 of this year, Skysona had already begun to generate revenue, of $400,000, and the first commercial infusion of the drug was completed in March. The company has completed cell collection for 3 patients, and expects that 5 to 10 patients will start on the drug this year. Bluebird has also made 6 patients starts – that is, cell collections – for Zynteglo, and completed the first commercial infusion of that drug, with an expectation of a revenue stream from it in the 2Q23 report.

Turning to the clinical program, the lovo-cel track, the company submitted its Biologics License Application for the drug to the FDA in April of this year and on June 21 announced that the FDA had accepted the BLA for review with a PDUFA date of December 20, 2023. Lovo-cel is a ‘potentially transformative’ gene therapy for sickle cell disease (SCD); it is based on a one-time dose, for use in patients ages 12 and up, designed to treat the underlying cause of the condition by inserting a functional gene into the affected cells.

The high potential of lovo-cel forms the core of the BofA view on this stock, as set forth by analyst Jason Gerberry. He suggests two main factors pointing toward success for this stock: “1) Under-appreciated sickle cell disease (SCD) gene therapy product – we expect BLUE’s lovo-cel to gain timely approval on the December Food and Drug Administration (FDA) action date (Prescription drug User Fee Act-PDUFA). While BLUE has had some timeline-related setbacks along its path to lovo-cel approval, we believe that the drug’s data are equal to/more robust than data of its closest competitor, and we forecast peak sales approaching $1bn. 2) Lovo-cel approval and launch as catalyst – a recent biologics license application (BLA) acceptance mitigates further timeline risk, in our view. With lovo on market for SCD, we forecast BLUE reaching 2026E profitability, assuming one additional financing event. Based on peer (competitor) valuations, we believe that investors understand the SCD revenue opportunity, and thus we view the lovo-cel launch as a ‘prove it’ event, key to BLUE’s share price appreciation.”

Based on lovo-cel’s potential strength, Gerberry rates BLUE shares a Buy, and his $10 price target shows his confidence in a one-year potential gain of 161%.

https://finance.yahoo.com/news/bank-america-says-2-stocks-151958827.html