On Tuesday, Goldman Sachs reiterated its Sell rating on 2Seventy Bio Inc. (NASDAQ: TSVT) with a steady price target of $2.00. The firm acknowledged that 2Seventy Bio's third-quarter sales of its Abecma product in the United States, reported at $77 million, exceeded the consensus estimates of $70 million. The company also matched the expected GAAP EPS with a reported ($0.19), aligning with the consensus forecast.
The analyst from Goldman Sachs pointed out the 42% quarter-over-quarter increase in Abecma sales, which surpassed expectations. Despite the near-term growth potential for Abecma, the firm expressed caution regarding the long-term prospects for the product. The cautious stance stems from anticipated competitive pressures from other therapies targeting BCMA, including the now-approved Carvykti by Johnson & Johnson and Legend Biotech, as well as T-cell engagers.
2Seventy Bio provided its first-time fiscal year 2024 sales guidance, estimating $240 million to $250 million. This forecast suggests a decline in fourth-quarter sales to approximately $62 million, a 19% drop from the previous quarter, which Goldman Sachs attributes to competition and the U.S. holiday schedule. Additionally, the company has discontinued a Phase 3 study for Abecma in a new patient population due to the shifting competitive landscape.
The market share for the CAR-T class in third-line settings and beyond is around 25%, with Abecma and Carvykti estimated to hold 25% and 75% of that share respectively. Goldman Sachs is also monitoring 2Seventy Bio's cost structure and margin profile, noting management's commitment to reducing non-GAAP operating expenses to approximately $200 million by the end of 2025 and extending the cash runway beyond 2027.
However, they emphasized that any improvement in margins from the profit-share with Bristol Myers (NYSE:BMY) Squibb would require higher sales volumes due to the high fixed costs associated with Abecma, with the break-even point between $300 million and $400 million in U.S. sales.
In other recent news, 2Seventy Bio has seen significant developments in their financial and operational performance. Leerink Partners has raised the price target for 2Seventy Bio shares from $15.00 to $25.00, maintaining an Outperform rating. This follows the discontinuation of the KarMMa-9 trial which was expected to contribute significantly to revenue growth. Despite this, the company, in collaboration with its partner, is expected to attain a stable and profitable position in treating third-line and beyond relapsed/refractory multiple myeloma.
The discontinuation of the KarMMa-9 trial is projected to save 2Seventy Bio over $80 million and accelerate its path to breakeven in 2025. The company reported a 30% increase in third-quarter revenue from the second quarter's $54 million, indicating a re-acceleration in Abecma's U.S. revenues. The demand for Abecma is also projected to show double-digit growth compared to the previous quarter.
In the Q2 2024 earnings call, 2Seventy Bio reported modest revenue growth, double-digit patient growth in apheresis for ABECMA, and a reduction of $28 million in operating expenses. Looking ahead, the company anticipates further reductions in operating expenses into 2025 and projects a revised net cash spend range for 2024 between $40 million and $60 million.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on 2Seventy Bio's financial situation, providing context to Goldman Sachs' cautious outlook. The company's market capitalization stands at $236.89 million, reflecting its current valuation in the biotech sector.
InvestingPro Tips highlight that 2Seventy Bio is quickly burning through cash and analysts anticipate a sales decline in the current year. These factors align with Goldman Sachs' concerns about the company's long-term prospects and the competitive pressures facing Abecma. The tip noting that the company suffers from weak gross profit margins is particularly relevant, given the discussion about the break-even point for Abecma sales and the company's efforts to reduce operating expenses.
On a positive note, InvestingPro data shows that 2Seventy Bio has had a high return over the last year, with a 1-year price total return of 111.01%. This performance contrasts with the current challenges and future uncertainties outlined in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for 2Seventy Bio, providing a deeper understanding of the company's financial health and market position.
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