Beam Therapeutics Could See Over 40% Upside Despite Unlucky IPO Timing

Health and Healthcare

Published: March 2, 2020 11:35 am

Last Updated: August 9, 2021 12:26 pm

Beam Therapeutics Inc. (NASDAQ: BEAM) is not exactly a household name in corporate America. It may not even be a household name in the world of biotechnology and health care at this point. The company managed to come public in 2020 just in time to catch the coronavirus selling panic in the financial markets. After closing its $17.00 per share initial public offering of 12,176,471 shares, including the exercise in full by the underwriters of their 1.588-million share overallotment option, the quiet period has now ended and that means that the analysts who work for firms in the underwriting syndicate can begin coverage.

Beam raised $207 million in its IPO before deducting underwriting discounts, commissions and related offering expenses. All the shares in the offering were offered by Beam Therapeutics. After opening at $24.00 on February 6, Beam’s first-day closing price was $18.75, but the shares traded up to as high as $31.80 on February 12, which also was the date of its $29.20 closing high.

The analysts at its underwriting firms are quite positive, and they all have Buy or Outperform equivalent ratings for big upside ahead. Beam Therapeutics is a biotechnology outfit that is developing precision genetic medicines for patients suffering from serious diseases. The company’s developing therapies treat sickle cell disease and beta-thalassemia, and it is also developing CAR-T cell therapies for pediatric T-cell acute lymphoblastic leukemia and pediatric acute myeloid leukemia. Beam also is developing therapies for glycogen storage disorder and for ocular and central nervous system disorders.

JPMorgan, Jefferies and Barclays acted as Beam’s joint book-running managers in its initial public offering, and Wedbush Securities acted as lead manager for its offering. Jefferies started coverage with a Buy rating and assigned a $32 target price, while Barclays started its coverage with an Overweight rating and the same $32 target price.

JPMorgan initiated coverage with an Overweight rating with a $31 target price. That report from analyst Eric Joseph called for multiple targets being focused with a first-to-market or a best-in-class potential in rare disease and oncology indications.

David Nierengarten of Wedbush Securities had a $32 target price along with its new Outperform rating. He sees Beam as an undervalued biotech, based on its differentiated and potentially best-in-class gene-editing platform of base editing. The company is believed to generate highly efficient and predictable single base-pair changes in genomic DNA in order to correct genetic disease and its current pre-clinical pipeline contains 12 programs across three delivery methods. Nierengarten’s report said:

These include therapeutic areas such as hematology (sickle cell disease and beta-thalassemia), oncology (ex vivo multiplex editing to create next-generation CAR-Ts for ALL and AML), liver diseases (alpha-1 antitrypsin deficiency and glycogen storage disorder type 1a), and ocular and CNS disorders (Stargardt disease). Delivery methods include electroporation (hematology and oncology), non-viral LNP delivery (liver diseases), and viral AAV delivery (ocular and CNS disorders). Notably, for each genetic disease program base editing could potentially allow a functional cure following one-time treatment, while for Beam’s oncology programs, we believe the ability to efficiently achieve multiplex editing without diminishing cell fitness makes base editing ideal for developing competitive allogeneic cell therapies.

Shares of Beam Therapeutics closed at $22.49 on Friday, so the average target price of $31.75 from these four reports would imply upside of 41%. Its shares were last seen trading up 1.3% at $22.78, with a $1.24 billion market cap.