Shares of clinical-stage biopharma Bellicum Pharmaceuticals (NASDAQ:BLCM) went up as much as 22% today after Wells Fargo initiated coverage of the stock. Analysts handed it an outperform rating and a price target of $28 to $31 per share, markedly higher than yesterday's closing price of $11.89 per share.
Why the optimism? Bellicum Pharmaceuticals is currently developing controllable cell therapies for graft-versus-host disease and pancreatic cancer, both of which have significant unmet medical needs. The company's technology platform allows doctors to "turn off" treatments to control safety complications in individual patients, which could be especially valuable for overcoming toxicity issues associated with promising immunotherapies making their way through clinical trials now.
The analyst note to investors argued its favorable view of the company:
Our favorable rating and positive outlook for Bellicum is based on the company's leading position in controllable cell therapies, for use in allogeneic (donor-sourced) transplant, chimeric antigen receptor modified T cell therapeutics, and engineered T-cell receptor therapeutics. With significant opportunity to expand the use of cell therapies in both cancer and non-cancer indications, mitigation of severe, life-threatening toxicity remains a key goal, and we believe that Bellicum's "switch technology" to turn cell therapeutics "on" and "off" will be at the forefront of this wave of new therapeutics. Our 2016E and 2017E EPS estimates are ($2.58) and ($2.66), respectively.
The large negative earnings expectations clearly demonstrate that the technology platform is in the earliest stages of development and far from commercialization. Indeed, Bellicum Pharmaceuticals does not generate meaningful revenue and won't for some time. Then again, that's par for the course for a clinical-stage biopharma.
Wells Fargo is a major analyst, so its coverage and outperform rating will be taken more seriously than those of smaller analysts with less credibility. The price target ratings may seem to be too optimistic, but let's not forget Bellicum Pharmaceuticals has a market cap of just $350 million -- well below many immunotherapy peers. Therefore, there is a case to be made that its innovative approach to immunotherapy isn't being properly valued by Mr. Market.