Wall Street can sometimes wax enthusiastic over young biotechs -- perhaps too much so. That may be the case right now with Palo Alto-based BridgeBio Pharma (BBIO 2.26%), which analysts' consensus estimates predict will see its shares increase by 46% within the next 12 months. That's after a 300% gain already in 2023.
But without consistent profitability despite two medicines on the market, and with its stock up so much this year, it's reasonable for investors to be skeptical about this biotech's prospects to rise even more. Let's dive in and analyze its plans for the next year to see if Wall Street has it right.
A specialist in rare diseases
BridgeBio focuses on developing medicines for rare diseases. It has a pair of commercialized programs, and three others in phase 3 clinical trials. None of its products or candidates have an addressable patient population of more than around 500,000 people. So for its products to succeed, it's important that they reach a large portion of the addressable patient population while also securing special regulatory designations and favorable terms with insurers.
Currently, BridgeBio's lead program for transthyretin amyloidosis (ATTR) is on track for submission to regulators before the end of the year. ATTR is a rare chronic illness that's characterized by symptoms like shortness of breath and wheezing, and it also causes heart failure if left unaddressed. While its true prevalence isn't known with certainty, and there appear to be significant geographical differences in the rates of diagnosis, there are thought to be around 155,000 people with the condition in the U.S.
But that figure is likely to rise with time as there is evidence that more sophisticated cardiac diagnostics tend to identify signs of ATTR more frequently than the traditional cardiac diagnostics in mainstream use. So the for the market for medicines that treat it, growth could well be on the way. And given that the global market for ATTR therapies could be as big as $20 billion before the end of the decade, shareholders are doubtlessly hoping for a big win with BridgeBio's program.
But will it have enough cash?
Management aims to grow the top line to reach more than $2 billion within five years, which is likely playing into the heightened expectations about the stock. That sum may not be attainable, however. In the first quarter, it brought in less than $2 million, which is so low because it sold off the commercialization rights to both of its approved medicines. To hit management's target, BridgeBio will need to get more than one of its candidates approved and soon.
On that front, its $467 million in cash and equivalents is expected to last through the end of 2024, funding three of its phase 3 clinical programs for rare diseases along the way. Its trailing-12-month operating expenses are $542 million, so it'll need to get a cash infusion sometime soon, likely by forging new development collaborations. BridgeBio already has $1.7 billion in debt on hand, and it just did a share offering worth $150 million earlier this year.
Therefore, the company will likely face high borrowing costs once it runs low on cash, assuming it can get another loan at all. In other words, the market appears to be very optimistic that management's goals will come to pass, even as the resources to do so are tightly constrained at best and badly insufficient at worst.
Not a compelling stock right now
Wall Street is counting on BridgeBio's ATTR being a hit. But there could be as many as five additional drugs competing for market share. BridgeBio's will be just one of the herd. Plus, it won't be the first entrant to the market, nor the last -- and later-released medicines may prove more effective.
Overall, it's unlikely that Wall Street's guidance will be met as it's too optimistic in light of its steep run-up so far -- and given the uncertainty of an approval and a soon-to-be crowded target market. Plus, BridgeBio doesn't have an abundance of money relative to its expenses.
In the long term, assuming it can get its ATTR therapy out the door, BridgeBio might still struggle to reach profitability. And that'll complicate getting any of its other late-stage programs commercialized. Then there's the issue of selling off its first two commercialized medicines, which doesn't provide much in the way of confidence in its commercial abilities.
Aside from that, one big reason to think that this stock is less likely to rise any further is its valuation. BridgeBio's price-to-sales (P/S) ratio is 67, an outlandishly high figure for a company that's making 77% less quarterly revenue than it did three years ago.
So BridgeBio probably isn't a good stock for you unless you're highly tolerant of risk, regardless of whether it meets Wall Street's mark or not. While it's possible that it could be an unexpected hit in a year or so, I don't plan on buying it, and I don't suggest you do either.
