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Hawk’s Nest

Unusual Call Buy in Biotech that Screens as Attractive M&A Target

by | Oct 29, 2021

Blueprint Medicines (BPMC) with 550 December $120 calls opening for $6, an unusual trade for the Biotech showing impressive relative strength to the sector. BPMC broke out this week of a large pattern that targets a move to $130+ after raising its FY21 sales guidance to $170M-$180M vs. the $148.5M estimate. BPMC has a $6.55B market cap and the consensus forecasts seen multiple years of major revenue growth coming. BPMC is a global precision therapy company that is inventing transformative medicines for people with cancer and hematologic disorders. BPMC has two approved products with AYVAKIT and GAVRETO and is  advancing multiple programs for genomically defined cancers, systemic mastocytosis, and cancer immunotherapy..BPMC expects part two of its PIONEER trial to be announced in mid-2022 for BLU-263 in non advanced systemic mastocytosis. BLU has collaborations with Roche and Genentech. Goldman notes “momentum for Ayvakit in advSM should bode well for expansion into indolent SM (ISM; key value driver) where we look for pivotal Ph2 PIONEER data in mid-2022 and are constructive on BLU-263 (second-generation KIT inhibitor with brain-sparing properties) to unlock a more significant commercial opportunity in broader mast cell disorders. We also see additional growth levers, particularly from the EGFR program where the global Ph1/2 BLU-945 (triple mutant inhibitor) study is under way (data possible in early 2022), the Ph1 BLU-701 (double-mutant inhibitor) trial is on track for initiation in 4Q21 with first preclinical data on the combination in early 2022, and earlier-stage assets BLU-222 (CDK2 inhibitor) and BLU-852 (MAP4K1 inhibitor) entering the clinic in 2022, none of which are included in our model.” Goldman has a M&A value on shares of $161 seeing it as a highly likely target given its selectively targeted approach and broad pipeline that offers opportunities for label expansion into multiple indications and earlier lines.

BPMC is what we tend to look for in a Biotech, a name with a strong commercial launch cycle, upside to the pipeline, and a strong trend.