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Topline Summary
Beam Therapeutics (NASDAQ:BEAM) is biotech with a diversified portfolio of cell and nanoparticle-based therapeutic candidates in its pipeline. They also have a big pool of assets that will carry them for years. But it’s going to take time to come to fruition, and I just don’t see the current pipeline and (lack of) data justifying the massive valuation of this early-stage company.
Pipeline Overview
BEAM focuses its efforts on exploiting CRISPR-based gene editing to therapeutic effect, either by manufacturing cells that can help fight different diseases, or by delivering corrective mutations to patients with serious genetic disorders. They have 2 main candidates in clinical trials, with several others of note worthy of discussion.
BEAM-101
We’ve seen recent approval for a pair of gene therapies in the last several months targeted at patients with sickle cell disease. However, these approved therapies either require viral delivery of the gene modifying tech, or rely on cells transduced with the edited genes, both of which can leave behind residual “diseased” expression of the sickle cell hemoglobin, suggesting that there is room for improvement.
BEAM-101 relies on CD34-positive hematopoietic cells that have been “base edited” in a way that will encourage reduced expression of the sickle cell hemoglobin while promoting expression of fetal hemoglobin. This differs from the recently approved Casgevy by not inducing “double-strand breaks” in the DNA to modify the gene. BEAM expects that this could lead to more efficient, theoretically safer gene editing.
The phase 1/2 BEACON study is ongoing to assess the initial safety and efficacy of BEAM-101 in patients with severe sickle cell disease. BEAM expects to have a data readout to share in the second half of 2024.
BEAM-201
This is a cell therapy comprised of CD7-directed chimeric antigen receptor T cells with multiple mutations to silence different genes, in an effort to target diseased, CD7-expressing cells (notably T-cell leukemia cells) while preventing graft-versus-host disease, T cell exhaustion, and sensitivity to immunodepleting agents.
This therapy is the subject of a phase 1/2 trial assessing its initial safety and efficacy in patients with relapsed or refractory CD7-positive T-ALL or T-LL. Initial findings from this trial are anticipated in later 2024.
Pre-Clinical Projects of Note
ESCAPE is intended to lead the company’s second wave of sickle cell disease drugs, taking a CD117 antibody, which has been shown to selectively deplete hematopoietic stem cells, while also transplanting non-disease stem cells that have a modified CD117 that is no recognized by the antibody.
This would allow BEAM to provide a cell therapy to patients that does not require the harsh preconditioning that normally wipes out the patient’s immune system and does damage to other organs. BEAM is looking to initiate IND-enabling studies this year.
BEAM-302 is a nanoparticle-based gene editing program intended to be a one-time treatment for alpha-1 antitrypsin deficiency. Their nanoparticle targets the most common mutation that leads to this disease, which currently has no disease-modifying treatment available. The company has shown that BEAM-302 can induce correction of PiZ mutated alleles in preclinical models, and they hope to initiate a clinical study in 1H 2024 outside the US.
BEAM-301 is another lipid nanoparticle-based gene editing therapy targeted at the management of Glycogen Storage Disease Type 1a by correcting the R83C mutation in G6PC, which plays a key role in the metabolism of glycogen. BEAM intends to file an IND in 1H 2024 for this therapy.
Financial Overview
As of their most recent quarterly report, BEAM held $1.04 billion in current assets, including $169 million in cash and equivalents and another $846.4 million in marketable securities. Their operating expenses were $125.5 million for the quarter, and they recognized $17.2 million in licensing and collaboration revenue.
After changes in fair value of derivative liabilities and non-controlling equity investments, as well as $12.7 million in interest income, BEAM recognized a net loss of $96.1 million for the quarter.
Even at this high burn rate, BEAM had between 10 and 11 quarters of cash and assets on hand to continue to fund operations.
Strengths and Risks
Strength – A robust, diversified pipeline…
Navigating the ongoing projects of BEAM is no walk in the park, as they have so many different irons in the fire (as evidenced by their massive R&D expense despite being essentially a phase 1 company). But they’ve really spread out to find the best possible opportunities and low-hanging fruits in the wake of the first gene editing successes. I have little doubt that at least one of these projects is going to be successful, at some point.
Risk – …that is full of early-stage and preclinical projects in competitive fields
But it’s important to respect that all of these studies are very early. Certainly we have precedent for early studies leading to approval of gene therapies in diseases like sickle cell, so there is hope that BEAM could get an approved indication without having completed a robust, randomized trial. But the results are going to have to be quite strong, and then they’ll need to contend with approved competition from the likes of Vertex in order to gain solid footing and reach profitability.
And then there’s the very real risk that some or all of these programs will fail at this initial stage. A $2 billion market cap is a lot of hype to manage for such a small company, and bad news on any front could mean a significant decline in valuation for the company, even though the pipeline remains broad.
Do not discount the competition piece, either. BEAM has approaches in development distinct to what’s approved, and they have the opportunity to grab the “best in class” monikers, but that remains to be seen in clinical studies. And once they get approved in, say, sickle cell disease, it may be tough to challenge those already-established therapies on the basis of findings from small clinical trials.
Strength – Those coffers, though!
That said, BEAM has a lot of time to sort things out here, and we’re absolutely going to see data readouts before cash becomes a major concern for them. This $1 billion+ in cash and assets is likely a big reason why BEAM is able to sustain such a high valuation in the first place, since it offers stability and a lot of interest income to help offset expenses.
Risk – Cash burn is massive, and that will catch up faster than you like
Unfortunately, you cannot ignore that BEAM has an unusually high cash burn rate for a company whose clinical trials have all started within the last year or so. These costs are going to catch up faster than investors would like, and if BEAM doesn’t get them under control, it puts every study under a lot of scrutiny and pressure.
Bottom-Line Summary
BEAM is currently an incredible science project that has an unfortunately heavy valuation to deliver on. When you’re priced at the level of a commercial-stage biotech, your clinical trials better deliver in spades, or else the decline is inevitable. I honestly don’t think that it’s reasonable to expect phase 1 trials to deliver at the level that justifies this market cap. Meanwhile, the cash burn is going to continue to erode the enterprise value of BEAM, which to me makes a recipe for slow decline in 2024.
Therefore, at this time, although they have a lot of promising irons in the fire, I think they’re sitting above a reasonable ceiling for their clinical station, and that makes me feel that considering “sell” would be reasonable at this time.
