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Is Bellicum Pharmaceuticals, Inc. a Buy Now?

By Cory Renauer - Feb 10, 2018 at 9:07AM

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Enthusiasm for this biotech is at an all-time low. Has the market pushed the stock into bargain territory?

Bellicum Pharmaceuticals, Inc. (BLCM -0.82%) shares have given up around three-quarters of their value since the clinical-stage biotech made its stock market debut at the end of 2014. Over the same time frame, other drugmakers have notched some big success developing similar technology.

Will Bellicum get left behind, or is it just a matter of time before the stock market appreciates this company's potential? Let's take a closer look to find out if this beaten-down biotech stock is a bargain -- or a value trap.

Hand reaching into a mousetrap baited with cash.

Is Bellicum Pharmaceuticals stock a bargain opportunity or a value trap? Image source: Getty Images.

Lead candidate on hold

Bellicum's lead candidate, BPX-501, takes an interesting approach to an old problem: Patients with a range of disorders and diseases would benefit from stem cell transplants, but perfectly matched donors are hard to find. Depleting T-cells -- the immune cells that recognize foreign threats -- ahead of a transplant reduces graft rejection risk, but this also exposes patients to dangerous infections. 

Bellicum's BPX-501 is essentially a collection of a patient's own T-cells modified to include an emergency kill switch that allows hospital workers to shut them down if patients begin showing signs of deadly graft-vs.-host disease (GVHD). Despite this focus on safety, three cases of brain damage deemed possibly related to BPX-501 recently incited the FDA to halt all U.S.-based studies with the candidate.

Damage assessment

The FDA's clinical hold means Bellicum must convince regulators its candidate isn't to blame for reported cases of brain damage before investigators can restart the drug's U.S. development program. Brain damage isn't uncommon among patients undergoing imperfectly matched stem cell transplants, which suggests the hold could be a temporary roadblock instead of a death blow for the company's lead program.

Although there's a chance Bellicum won't be allowed to dose another patient with BPX-501 in the U.S. ever again, a long delay as Bellicum amends trial protocols to mitigate the risk of further safety issues seems more likely. In the meantime, the company will continue an ongoing pivotal trial in the EU with BPX-501 and pediatric patients.

The European study, titled BP-004, is measuring rates of infection, GVHD, and death among patients that receive BPX-501 after their transplants. So far, investigators have proven BPX-501 cells can survive and thrive after their reintroduction. Whether or not that translates into improved outcomes, though, remains a mystery.

Now that the FDA's clinical hold has besmirched BPX-501's reputation, Bellicum needs to show an eye-popping benefit, or the drug's eventual launch will fizzle. Look for top-line results by the end of the year.

Beyond the 501 blues

Unfortunately for Bellicum, it doesn't have a great deal to fall back on if BPX-501 is a total bust. In 2017, the company began dosing the first patients with a chimeric antigen receptor T-cell (CAR-T) therapy aimed at pancreatic cancer, which targets prostate stem cell antigen called BPX-601. The experimental CAR-T therapy boasts a fancy new switch supposed to dial up its activity, plus the same emergency kill-switch as BPX-501 if that activity gets out of hand.

There's a huge unmet need for new therapies to combat pancreatic cancer, but solid tumors are a big problem for drugs like BPX-601 because they target proteins on tumor cell surfaces. With solid tumors, there just isn't a lot of surface area to work with. If Bellicum's proprietary activation switch can overcome this challenge, the stock would soar, but I wouldn't get excited about the potential until we have some data to chew on. 

The phase 1 trial with BPX-601 should wrap up around the end of 2019. That's about the same time Bellicum expects to finish a 48-patient phase 1 study with BPX-701 for the treatment of acute myeloid leukemia.

Bellicum's third clinical-stage candidate, BPX-701, isn't a CAR-T therapy, but it has a similar effect. It's part of a related class of experimental therapies called T-cell receptors, none of which have proven themselves in a late-stage clinical trial.

What the numbers say

Successfully launching effective new treatments for AML and pancreatic cancer would eventually generate billions in revenue, but pinning a combined value of more than $100 million on BPX-701 and BPX-601 would be dangerously optimistic once you adjust for basic drug development risks. The FDA ends up reviewing applications for less than 5% of new drug candidates that begin phase 1 clinical trials.

Despite BPX-501's safety issues, and a lack of clinical data for earlier-stage candidates, Bellicum looks awfully cheap for a company with two early stage candidates and another in a pivotal trial. At recent prices, the biotech stock's enterprise value is just $104 million.

You should never buy a stock simply because you hope it will be acquired for a premium, but it's also important to understand lots of big drugmakers are looking to bolster their oncology pipelines with CAR-T candidates, and corporate tax reform just left them flush with cash. Gilead Sciences acquired CAR-T pioneer Kite Pharma for $11.9 billion last October. More recently, Celgene plunked down $9 billion for Juno Therapeutics.

Bellicum finished last September with just $113 million in cash, cash equivalents, and marketable securities after operations burned through $68 million during the first nine months of the year. With trials on hold, the company's cash burn rate should mellow in the quarters ahead, but a dilutive share offering will probably become necessary around the end of 2018.

If the BP-004 trial flops or the FDA refuses to lift its clinical hold on BPX-501, a depressed stock price could make raising adequate capital extremely difficult. If Bellicum eventually joins the peers that have left it in the dust, the gains would be monstrous. Until we have more data to chew on, though, investors are probably better off watching this story unfold from a safe distance.

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