Beam Therapeutics (NASDAQ:BEAM) is a biotech firm that focuses on the development of novel treatments using a form of gene editing called base editing. This precision treatment is being advertised as the next generation of gene editing. However, the Massachusetts-based company is some distance behind its CRISPR peers, with only two disclosed candidates in clinical trials. I remain neutral on BEAM despite the possibilities behind the technology as well as the potential for a lucrative acquisition.
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Is Beam Therapeutics an M&A Target?
According to a recent note from Wells Fargo (NYSE:WFC), Beam Therapeutics’ peer, CRISPR Therapeutics (NASDAQ:CRSP), was listed as a high-potential acquisition target for 2024. The report comes amid rising dealmaking in the biotech and pharma space, with Wells Fargo analysts selecting companies in the small-to-mid-cap space that would fit into larger pharma businesses. Beam Therapeutics, on the other hand, was identified as a company that didn’t tick all the boxes but could still be an acquisition target.
The downward movement of the share price would certainly contribute to acquisition rumors. Over the past 12 months, the stock has lost 30% of its value. And with a market cap of around $2 billion, it would be small fry for some of the biggest players in the pharma and biotech space. However, I’d never buy a stock purely because a takeover was possible or even likely. It’s highly risky and could reveal a lot of downside if there were genuine M&A interest that subsequently fell through.
Beam Therapeutics’ Road to Profitability
Beam Therapeutics isn’t expected to turn a profit until 2030. That’s six years away. According to forecasts, and forecasts can be very suspect at this range, the stock is trading at 17.8x earnings for 2030, 6.7x earnings for 2031, 5.1x earnings for 2032, and 3.7x earnings for 2033. Of course, these figures don’t mean a lot, given the associated timeframe.
In the near term, Beam Therapeutics has strategic deals with the likes of Pfizer (NYSE:PFE) and Apellis (NASDAQ:APLS), providing financial support. Collectively, Beam’s partnerships have delivered $675 million in upfront payments and potentially more than $1 billion in milestone payments. Overall, this represents strong cash flow potential, but good practice to not take milestone payments for granted as the failure rate in novel technologies can be high.
Is Beam Therapeutics Ahead of the Curve, or Behind?
Beam Therapeutics is a leader in something called base editing. It’s being touted as the next generation of gene editing because it appears to have a better safety profile and may be more effective than current CRISPR gene editing. It makes fewer breaks in the DNA during multiplex gene knockout than CRISPR-Cas9 and does not require a toxic DNA donor molecule for genetic correction. However, Beam Therapeutics is simply further behind than its gene editing peers because base editing is less developed.
The big question is, will base editing be that much safer and more efficient that it can displace existing gene editing technology? While base editing shows promise with its ability to make precise changes to DNA without causing double-strand breaks — reducing the risk of unintended mutations and off-target effects — it remains to be seen whether these advantages will be sufficient to fully replace methods like CRISPR-Cas9.
There are currently two gene editing treatments approved in the U.S. — one from CRISPR Therapeutics and the other from Bluebird Bio (NASDAQ:BLUE). Both are approved for the treatment of sickle-cell disease (SCD) and beta-thalassemia.
Beam currently has two treatments in clinical trials. Beam-101 is a program for the treatment of SCD and beta-thalassemia, but initial clinical trial data is not expected until the end of the year. I’d assume this means the candidate won’t be brought in front of regulators until at least late 2025. The obvious concern here is that CRISPR Therapeutics and Bluebird will have a considerable headstart in commercializing their products. Both companies have already noted that their rollouts have begun.
Beam-201 is the company’s program for the treatment of relapsed/refractory T-cell acute lymphoblastic leukemia/T-cell lymphoblastic lymphoma. The first patient from the trial was dosed in September 2023. The current trial aims to identify the recommended dosing for phase two while assessing safety and tolerance.
The treatment represents a novel approach to one of the most challenging conditions to treat and could represent a major breakthrough if the technology lives up to its hype. Beam-201 modifies t-cells (immune cells) in order to express a chimeric antigen receptor (CAR) that can target the cancer cells. The treatment also silences multiple genes to prevent the CAR-T cells from attacking one another.
Is Beam Therapeutics Stock a Buy, According to Analysts?
On TipRanks, BEAM comes in as a Moderate Buy based on five Buys, five Holds, and zero Sell ratings assigned by analysts in the past three months. The average Beam Therapeutics stock price target is $45.00, implying an 94.2% upside potential.
The Bottom Line on Beam Therapeutics
Beam Therapeutics is a highly exciting company with a promising portfolio of candidate treatments using base editing. However, it’s right to remain cautious about investing in a company purely based on the strength of its early-stage pipeline. Without a commercially viable product in the near term, the company will rely on partner payments for revenue. Thus, for now, I remain neutral.
