Global Blood Therapeutics Stock: Changing My Strategy (NASDAQ: GBT)

Stock Market

Human red blood cells stream in vein

Rasi Bhadramani / iStock via Getty Images

Last year was marked with significant achievements and growth for Global Blood Therapeutics (GBT), which was able to make substantial progress improving awareness of their flagship product, Oxbryta. The company continues to report encouraging commercial trends that show an increasing number of patients on therapy. In addition, the company received a label expansion in December that has Oxbryta covering patients as young as 4 years old to increase their market. What is more, Global Blood Therapeutics is working hard to expand Oxbryta outside the US and is now preparing for launching in the EU. Furthermore, Global Blood Therapeutics has a robust late-stage pipeline that should accelerate growth in the coming years. Despite this progress, GBT has experienced strong selling pressure over the past couple of years and is now chopping around. I believe the market has removed most of GBT’s premium valuation and is worthy of speculative long-term investment. As a result, I have decided to change my GBT strategy.

I intend to review the company’s Q4 / 2021 earnings and their 2022 company guidance. In addition, I discuss some of the company’s growth opportunities, as well as some downside risks to consider. Finally, I reveal why I am looking to change my GBT strategy.

Q4 / 2024 Earnings

Recently, Global Blood Therapeutics reported their Q4 / 2021 earnings that revealed a miss on EPS and beat on revenue. The company reported $ 56.1M in total net revenue from sales of Oxbryta in Q4, which was up 36% year-over-year and 8% from the third quarter. For full-year 2021, the company had $ 194.7M in revenue, which was up 57% year-over-year.

R&D expenses for Q4 came in at $ 59M and $ 212M for the full year, both of which were up from 2020. The increase in R&D was due to the company working on two Phase III studies for inclacumab that included a $ 5.3M clinical milestone payment . In addition, the company was performing some preclinical work for Oxbryta and GBT601. For SG&A, the company reported $ 79M for Q4 and $ 267M for the full year. These SG&A expenses were up compared to Q4 and full-year of 2020 due to increased employee-related costs, the commercialization of Oxbryta, as well as the expansion into Europe. In the end, the company reported an $ 88M net loss for Q4 and $ 303M for the full year.

In terms of cash, Global Blood Therapeutics ended 2021 with $ 735M cash, cash equivalents, and marketable securities thanks to the ~ $ 384M raised from financing activities in Q4.

Commercially, the company performed quite well in Q4 with the company reporting an increase in the net number of patients on Oxbryta. The company reported increased demand from existing and new patients with around 800 new prescriptions during the quarter despite fewer provider-patient interactions due to the pandemic and the holidays. In addition, Global Blood Therapeutics reported they added around 100 new prescribers in Q4, bringing total to near 2,000 since the launch of Oxbryta.

In terms of payers, Global Blood Therapeutics is seeing improvements and has 90% of covered lives for patients12 and older living in the United States.

Growth Opportunities

Global Blood Therapeutics has several opportunities that will ensure near-term and long-term growth. First, the company is seeing indications that patients’ health care visits are returning to pre-pandemic levels, which will improve new to brand prescriptions.

Second, the pediatric label extension and new formulation approved by the FDA in mid-December has opened the door to roughly 15% of the total patients in the United States. The new once-daily oral liquid dosage form of Oxbryta is appropriate for young children. In addition, 95% of 4 to 11-year-old sickle cell patients live in the geographies already covered by the company’s sales force. Thus, the new label not only expands the market, but these patients are most likely being treated by target prescribers.

Third, Global Blood Therapeutics is seeing some patients of the previously discontinued patients restart therapy on Oxbryta. This is a good sign for the company because they can still be optimistic about discontinuations.

Fourth, the company’s expansion into the European Union and the UK. Global Blood Therapeutics just received approval for Oxbryta in the EU, where there are roughly 52K SCD patients. Global Blood Therapeutics is now preparing for launch in Germany, and beginning preparations for launch across Europe. In the UK, Global Blood Therapeutics has submitted for approval and expects a decision on Oxbryta by mid-year. Beyond Europe, the company is taking aim at the Middle East for ~ 100K patients, and Latin America for another ~ 100K patients.

Fifth, is the company’s pipeline, including Inclacumab, the company’s P-selectin inhibitor for VOCs reduction. Inclacumab is now in the two Phase III studies. The company’s next-gen hemoglobin polymerization inhibitor, GBT601, has been shown to have the prospect of being a best-in-class therapy that can achieve greater than 30% mean hemoglobin occupancy with no safety signals detected at 100 mg daily dose. GBT601 is more potent than Oxbryta but at a much lower dose requirement. It is possible that GBT601 has the potential to provide a functional cure in a once-daily pill. Global Blood Therapeutics is on track to start a Phase II study by mid-year. So, it is possible that Oxbryta’s biggest competition is actually in-house.

GBT Pipeline

GBT Pipeline (NASDAQ: GBT)

In summary, Global Blood Therapeutics is approaching multiple new growth prospects for Oxbryta in the US and around the world. Furthermore, Global Blood Therapeutics has an impressive pipeline, which could accelerate growth in the coming years.

Downside Risks

As with many newly commercialized biotech / pharma companies, Global Blood Therapeutics has more than a few downside risks that investors should be aware of. First and foremost is the chance that Oxbryta does not reach its full potential and Global Blood Therapeutics has to tread water until its other pipeline candidates make it to the market. Indeed, the company’s entire pipeline could be outmoded if one of the SCD gene therapies is able to produce a functional or actual cure for the disease.

Another lingering concern is the impact of COVID-19 which reduced in-person contacts for patients and sales reps. Indeed, the pandemic numbers appear to be improving, however, it is possible another variant pops up in the future that will reduce interactions. Obviously, this could have a negative impact on earnings.

Hybrid Strategy

In a previous GBT article, I discussed how I hadn’t touched my GBT position after banking some profits on Oxbryta’s approval. At that time, I was happy to sock drawer GBT and check back in 5 years later. However, I decided to alter my strategy due to the sell-off made a few additions in anticipation of Oxbryta’s growth and company milestones that would support the share price. It was not long after that article that I decided to change my approach to a value approach based on the company’s potential buyout valuation and was looking for a potential reversal set-up to start accumulating. Well, we have not seen a quality reversal setup, and as a result, I have sat on my hands as GBT has mostly chopped around for the last seven months.

GBT Daily Chart

GBT Daily Chart (Trendspider)

Now, I am switching up my strategy of buying on technical setups, to a hybrid of valuation and dollar-cost strategy. Using this method, I will make periodic investments. DCA, while also employing some buy targets.

I plan on making minute bi-monthly additions for the remainder of 2022. In addition, I will use a couple of buy targets to ensure I am still accumulating at an acceptable valuation.

Right now, GBT is still a bit overvalued for its near-term prospects, so I will look for an acceptable value for a buy target and a discounted buy target. The acceptable valuation (Buy 1), will use a combination of the Street’s low-end 2025 annual revenue estimate ($ 442M) in a combination with the industry’s average price-to-sales of 5x, with a discount for time. Using these metrics, I got a buy target of $ 22.

GBT Annual Revenue Estimates

GBT Annual Revenue Estimates (Seeking Alpha)

The discounted valuation (Buy 2), will use a combination of the Street’s low-end 2025 annual revenue estimate ($ 442M) in a combination with the industry’s average price-to-sales of 5x, with a discount for time and error. Using these metrics, I got a buy target of $ 16.60. I intend to set some upsized buy orders just above these target prices.

By using this hybrid strategy, I am slowly accumulating with my periodic buy orders, but I will have some upsized orders in place just in case the overall market or sector wants to take GBT lower.

Overall, I still remain bullish on GBT’s long-term projections and will hold a core position in anticipation GBT becomes the leader in SCD and / or the company is acquired for a premium price.

Source link

Leave a Reply

Your email address will not be published.