Blueprint Medicines Stock: Rampant Growth Mostly Priced In (NASDAQ:BPMC)

This is my initial Blueprint Medicines (NASDAQ:BPMC) article. Blueprint is a commercial stage biotech which is pegging potential blockbuster revenues for AYVAKIT/AYVAKYT (avapritinib), its one FDA approved product.

With its hefty market cap anticipating its exceptional performance. I rate it a “hold”. For more risk tolerant investors, there is still room to run, as explained below.

Sources for this article will include the following released with its Q1, 2024, earnings on 05/02/2024 – press release (the “Release“); earnings conference call (the “Call“), slide deck (the “Deck“) and 10-Q (the 10-Q).

Blueprint generates growing revenues from its several AYVAKIT FDA approvals.

AYVAKIT has had a convoluted approval history as follows:

1. 01/09/2020 — approved for certain adults with unresectable or metastatic gastrointestinal stromal tumor (GIST);
2. 06/16/2021 — approved for adult patients with advanced systemic mastocytosis (AdvSM), including patients with aggressive systemic mastocytosis (ASM), systemic mastocytosis with an associated hematological neoplasm (SM-AHN), and mast cell leukemia (MCL);
3. 05/22/2023 — approved for the treatment of adults with indolent systemic mastocytosis (ISM).

Subsequently on 12/12/2023, avapritinib was approved in Europe under the name AYVAKYT. Its European launch will start in Germany. It will progress to:

…additional markets based on local healthcare technology assessment and reimbursement process timelines.

The table below from Blueprint’s Q4, 2023 10-K (p. F-24) lists AYVAKIT/AYVAKYT’s annual product revenues through 2023:

As its approved indications have grown, its product revenues have grown exponentially.

Blueprint reported an exceptionally strong Q1, 2024.

Going into Q1, 2024 Wall Street Analysts were atypically conservative in their expectations for Blueprint. In my experience they typically overshoot in estimating potential values for young biotechs. Not so Blueprint. As I write on 05/02/2024 Seeking Alpha reports the following average price target for the 17 Wall Street Analysts covering Blueprint:

After its Q1, 2024 earnings, and its strong upward price action, I expect they will raise targets. A quick look at the Release shows that Blueprint’s AYVAKIT rollout, now in its third full quarter since its latest FDA approval in ISM is firing on all cylinders.

The Release opens with the following two AYVAKIT wakeup calls:

— Achieved $92.5 million in AYVAKIT net product revenues in the first quarter 2024 —

— Raising guidance to $390 million to $410 million in full year AYVAKIT net product revenues –

That is some remarkable performance. Consider that its revenues have been virtually doubling every year for the past three years as shown by the table above. Its full year 2023 revenues were $204 million. If it hits the $400 million midpoint of its newly revised 2024 guidance it will have nearly doubled again.

Slide 5 from the Deck provides a graphic representation of its growth:

Beyond its approved AYVAKIT, Blueprint has a predominantly early stage pipeline.

Normally I would look to a company’s website to set out its pipeline. Unfortunately the pipeline section of Blueprint’s website is too diffuse for this purpose. Accordingly I will copy the pipeline graphic from its latest 10-K (p. 15):

Its second therapy behind its approved AYVAKIT is elenestinib in treatment of ISM. As pointed out by CEO Haviland during the Call it is being positioned to maximize the long term performance of its SM franchise. Beyond that lie only early stage programs.

Its MAST programs are designed to prove insights it has gleaned from its successful AYVAKIT development. In regards to BLU-808 it is pre-IND. CEO Haviland noted:

The BLU-808 program built on the significant insight we have gained in mast cell biology and targeting KIT, the master control switch or mast cells which we believe has the greatest prospect of improving outcomes for a large number of patients across allergic inflammatory diseases.

As for the oncology side of its pipeline, BLU-222 is its lead molecule. During the Call CEO Haviland noted that she is expecting to develop this with a collaboration. She is targeting H2, 2024 as when this might develop.

Blueprint has solid financials without expected concern as to cash burn or cash runway.

Slide 10 of the Deck sets out an overview of Blueprint’s financial position:

With liquidity of $735 million and revenues for the year guided to hit ~$400 million, neither cash burn nor cash runway are likely to be troublesome. During the Call CFO Landsittel advised:

We believe that the current full year sell-side consensus for total costs and expenses of approximately $715 million which includes non-cash stock-based compensation expense reflects an appropriate estimate for 2024.

With quarterly noncash stock based compensation of ~13 million as shown by the slide footnote above this results in annual cash outlay of $663 million. Reducing it by $400 million expected AYVAKIT revenues reduces it to $223 million annual cash burn.

As for cash runway this is uncertain. However if Blueprint burns $223 million in 2024, it will still have $512 million cash. Shareholders can take comfort in the likelihood that its runway in out years will be extended by ongoing growth in its AYVAKIT revenues.

Early commercial stage biotechs are rife with risks; such is the case for Blueprint.

As I write on 05/03/2024 Blueprint sports a daunting $6.72 billion market cap. It was trading at $94.86 when it closed on 04/30/2024. It has been trading with great elasticity so far on 05/03/2024. It has hit a high of $110.93 and a low of $106.34. It is always somewhat daunting to buy into a stock right when it is at its 52 week high as is the case for Blueprint.

In terms of risks to its business as opposed to its stock I would consider competition to be high on my list. Its 10-K at page 23 notes:

AYVAKIT/AYVAKYT and elenestinib (BLU-263) face competition for advanced SM from Novartis AG’s midostaurin and imatinib, and may face competition from drug candidates in development, including that being developed by Cogent Biosciences, Inc. and Hoth Therapeutics. Avapritinib and elenestinib may face non-advanced SM competition from drug candidates in development, including those being developed by AB Science S.A., Allakos Inc., Cogent Biosciences, Inc., Hoth Therapeutics, Invea Therapeutics Inc., and Theseus Pharmaceuticals Inc.

With its pipeline offering no late stage candidates, Blueprint is pretty much a one-trick pony. The good news is that its one trick, AYVAKIT has proven to be exceptionally rewarding; nonetheless it is concerning that it has no near or midterm support waiting in the wings.

Conclusion

During the Call CEO Haviland pegged AYVAKIT as having a $2 billion peak sales potential. If one starts with that as a take off point for valuing Blueprint its current market cap of $6.72 billion reflects a conservative multiple of 3X plus its cash.

In order to support a higher price one has to apply a higher multiple; reasonable 4X or 5X multiples would support market caps of up to Blueprint as a “Hold”.