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Roth Capital Bullish on bluebird bio Inc (NASDAQ:BLUE): Buy on Weakness

By Howard Kim

Debjit Chattopadhyay of Roth Capital has maintained a Buy rating on bluebird bio Inc (NASDAQ:BLUE) with a price target of $192, marking a 45% potential upside from yesterday’s closing price of $132.73.

Chattopadhyay said since the end of May, there has been a nearly 31% drop in bluebird bio’s shares. According to him, the key reasons behind this drop are the absence of any near-term catalysts, the IPO of Global Blood Therapeutics, and several transactions related to 10b-5. All these factors have eroded the NPV related to the company’s gene therapy for Sickle Cell Disease, or SCD. However, given that ASH abstracts are less than two months away, and the upcoming independent validation of lentivirus-based GT, Chattopadhyay expects the stock to do well.

He added, “Given the rarity of the indication and the strength of the clinical data thus far, we are assuming a 65% probability of success for the Lenti-D program in CCALD. We also assume that ongoing Starbeam study (despite the limited number of patients) should be sufficient for regulatory approval. We assume commercial launch during 2018, and our base case pricing assumption is $1.2M per patient. We model peak sales of $112M during 2025, which drives our NPV for Lenti-D to $3/share.”

Chattopadhyay made a few observations on the view that GBT’s IPO could be a factor behind the drop in bluebird’s stock price. “If the proximate cause of the recent weakness in bluebird’s stock was the ongoing IPO roadshow of Global Blood Therapeutics (GBT-NC), we would like to note a few key points: immune-related side-effects of a similar molecule has led to discontinuation previously (class effect); GBT’s ongoing phase 1 study is enrolling SCD patients who are transfusion independent; and patients are on background hydroyurea therapy.” Overall, the analyst recommends “buying the bluebird weakness.”

The analyst is not alone in his bullishness on bluebird. According to the three analysts polled by TipRanks in the last three months, all of them are bullish on the company. The average 12-month price target between the three analysts is $216.33, marking a 63% potential upside from current levels.

Debjit Chattopadhyay is a top-ranked analyst with a 64% success rate recommending stocks and +26.4% average return when measured over a one-year horizon and no benchmark. The analyst had rated bluebird 17 times since September 2014, earning a 59% success rate recommending the biopharmaceutical company with a +50.5% average return per BLUE rating.