Global Blood Therapeutics reports Q4 earnings, summarizes upcoming catalysts

Global Blood Therapeutics' (GBT) novel sickle cell disease drug, Oxbryta, has officially hit the market, netting a mere $2M in revenue. Meanwhile, R&D costs have nearly doubled in the last year. SG&A costs have nearly tripled! Such is expected when launching a drug, but the question is always, "to what extent is it tolerable?"

Global Blood hopes, following a non-dilutive loan, to be cash flow positive before having to resort back to dilution again:

Entered into a $150 million loan agreement with funds managed by Pharmakon Advisors LP, and drew down on the first $75 million of the non-dilutive loan. The proceeds will be used to advance the discovery and development of potential novel treatments for SCD and other grievous blood-based conditions without diverting financial resources from the launch of Oxbryta. GBT believes that the proceeds from this loan, in conjunction with existing cash and investments, have the potential to provide the necessary runway for the company to achieve positive cash flow while enabling the continued advancement of clinical development programs and other earlier-stage product candidates.

Source: GBT

The company has nearly $700M in cash and investments. This can be expected to get them through mid-2021, even with an additional $75M pending from the loan. I highly doubt the company will be cash flow positive before 2022 and suspect Global Blood will have to dilute once more. This will hopefully occur at a more advantageous pricing and following good news (e.g. successful confirmatory trial, strong sales ramp).

On the clinical front, GBT continues to enroll patients into the confirmatory TCD study.

Source: GBT March '20 corporate slides

Success would likely expand the label to children under the age of 12 as well. The confirmatory trial would also serve to prove its clinical benefit, which Oxbryta has yet to do. Accelerated approval was granted because Oxbryta is theoretically likely to procure a clinical benefit. If the confirmatory trial is to fail, Oxbryta would be pulled from the market and one would have to ask if the drug is a viable one at all. However, I propose success in the TCD trial is likely:

Source: GBT Nov. '19 corporate slides

Remaining catalysts are summarized below:

Source: GBT March '20 corporate slides

Global Blood is also involved with a few non-pivotal trials that aim to shed light on their therapeutic:

Despite achieving accelerated approval and grabbing nearly $90/share in a bull market, major catalysts and upside remain for Global Blood.

While I am not super positive about Oxbryta's revenue prospects prior to full approval, I do expect major clinical developments over the next several months. Such clinical developments could help shed light on the clinical effects of Oxbryta beyond hemoglobin improvement. Global Blood Therapeutics remains a conviction idea as I believe Oxbryta is a game-changer in sickle cell disease due to its ability to improve hemoglobin levels without a worsening of blood viscosity. A ~$3.5B enterprise valuation for Global Blood does not yet fully consider its potential in sickle cell.

Risks include, but are not limited to: Oxbryta confirmatory trial failure, dilution, Oxbryta safety and/or efficacy issues, poor Oxbryta market performance, competition (e.g. gene therapy), and US recession.

To expand on competitive risks, I do not believe gene therapy will serve as a major competitor to Oxbryta within the drug's relevant market time (patent expires in several years). As I've touched upon in previous articles, sickle cell patients are weary of curative therapies and gene therapy would be very costly and for only a select few. Furthermore, I am not aware of any additional drugs in development that share the potentially disease-modifying mechanism of action that Oxbryta bears.

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Additional disclosure: 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.

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Global Blood Therapeutics: Key Catalysts Remain As The Search For Clinical Benefit Continues - Seeking Alpha

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