It's only been a couple of years since BridgeBio Pharma (BBIO 7.95%) made its stock market debut, and the company already has two new drug applications under review by the Food and Drug Administration. This biotech start-up foundry hasn't had any trouble attracting institutional capital, but most everyday investors have never heard of BridgeBio Pharma or its growing web of wholly owned subsidiaries.
Many of the reasons to buy BridgeBio could also apply to other biotech stocks, but it's the company's unique approach to the unusual business of developing new drugs that makes it my top pick this year. Here's why this under-the-radar biotech has a better chance to beat the market than any of its peers.
Generally, biotech start-ups are founded by scientists who take the helm themselves, or hire a CEO skilled at presenting really complicated scientific data to investors. BridgeBio's unique advantage is an ability to find small teams of scientists and quickly turn their ideas into fully functioning biotechnology companies.
Every step along the drug development pathway is exponentially more expensive than the one before it. By providing everything eager scientists need to turn their ideas into potential new drugs before they've already started businesses, BridgeBio Pharma is assembling an industry-leading pipeline of experimental new drugs for peanuts.
BridgeBio Pharma owns 64% of Eidos Therapeutics (EIDX) and plans to acquire the other 36% following a shareholder vote on the matter later this month. Eidos was the first and only BridgeBio affiliate to spin off from its parent, and for the foreseeable future, it will be the last.
A lot for relatively little
Some clinical-stage biotech companies reach 10-figure valuations with a few dozen employees. BridgeBio, which functions like two dozen clinical-stage companies, had just 100 employees at the end of September, which kept total operating expenses down to a relatively modest $355 million during the first nine months of 2020.
BridgeBio doesn't have any approved products to sell yet, but it could have two before the end of the year. In September, the FDA began reviewing an application for fosdenopterin, an experimental treatment for molybdenum cofactor deficiency. This is a rare but lethal metabolic disorder that currently lacks effective treatment options.
In December, the FDA began reviewing a second new drug application from BridgeBio for a potential new treatment for bile duct cancer called infigratinib.
BridgeBio's first candidate to enter late-stage trials, Acoramidis, could become a blockbuster treatment to prevent heart damage caused by broken-up fragments of a protein called transthyretin (TTR). Unlike most of BridgeBio's new drug candidates, Acoramidis isn't in line to become the first available treatment for TTR-mediated cardiomyopathy. In 2019, Pfizer (PFE 0.10%) launched a TTR-stabilizer in the U.S. called Vyndaqel, and it's already producing $1.4 billion in annualized revenue for the big pharma. In about a year, BridgeBio will read out top-line results from a phase 3 trial with Acoramidis that should tell us if it can compete with Pfizer's blockbuster.
Fast and focused
BridgeBio Pharma only acquires and develops research related to cancers with clear genetic drivers, and diseases that arise from defects in a single gene. This might seem like a constraint, but it's actually a deep well to draw from. Around 27 million Americans live with a genetic disease, and about 95% of those diseases don't have an available treatment option yet.
Staying focused hasn't slowed down the company's ability to find new avenues to explore. In just five years, BridgeBio Pharma moved more than 10 potential new drugs into human-stage testing. At the moment, the company's running more than 20 programs that could eventually produce new drugs of their own.
In addition to potential approvals for its first two drugs, this year we could also see midstage trial data from BBP-631, an experimental gene therapy for congenital adrenal hyperplasia, which affects the adrenal glands. Also in 2021, the company will report results from a phase 2 study with encaleret, an experimental treatment for autosomal dominant hypocalcemia type 1 (ADH1).
Encaleret acts on the calcium-sensing receptor to help ADH1 patients maintain steady levels of calcium in their bloodstream. If Encaleret appears safe and effective for ADH1 patients, there's also a good chance it will work for a much larger population of people with blood-calcium regulation problems caused by thyroid surgery.
BridgeBio Pharma finished September with $711 million in cash after burning through $329 million in the first nine months of 2020. With potential revenue from two new drugs on the way, there's a good chance the company won't need to dilute the value of existing shares with a secondary offering. That makes it a great stock to buy now and hold for the long run.