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Is Beam Therapeutics Stock a Buy Now?

Motley Fool - Sat Nov 18, 2023

When it comes to gene-editing companies on the cutting edge, Beam Therapeutics (NASDAQ: BEAM) is keen to be one of the leaders. While it's a bit of a laggard in terms of its pipeline's maturity compared to a few of its competitors, few would claim that its technology platform is unimpressive. Plus, it's collaborating with industry leaders like Pfizer and Eli Lilly.

But is the stock going to drive a lot of growth in your portfolio, or leave you holding the bag with massive losses for years? As it turns out, this investment could easily do both of those things, so let's take a closer look.

This stock is a risky bet

Like most biotech stocks that haven't yet commercialized any medicines, Beam is living on borrowed time. It needs to successfully move its most promising candidates through clinical trials without running out of money, preferably generating enough exciting data along the way that it won't have trouble finding financing or wealthy collaborators to help it close the loop. Because it's closer to the start of that process than the end, there's a very long road ahead. That could lead to high returns for those who invest in it now, but the risks loom even larger than they would with a more developed business.

In terms of its notable pipeline programs, Beam has two to consider. There's BEAM-201, its antigen receptor T-cell (CAR-T) therapy candidate for acute myeloid leukemia (AML), and BEAM-101, its gene-editing therapy for sickle cell disease (SCD). Both are in early-stage clinical trials, and both programs are made possible thanks to its high-tech gene-editing platform.

By the end of next year, the biotech hopes to give investors some interim data from BEAM-201's clinical trial, which could be a significant catalyst for the stock. The company also plans to file the relevant paperwork to petition regulators to start clinical trials for a gene-editing candidate to treat or potentially cure glycogen storage disease Ia sometime in the first half of next year. If the regulators say it can move forward, it'll be a minor positive catalyst too.

The trouble is that the disease markets Beam is targeting with its programs are far from being gargantuan. There are only around 100,000 people with SCD in the U.S., and AML only affects around 20,000 in the country per year. What's more, Beam will face stiff competition in both of those markets if it manages to get its therapies approved, which won't happen for years at best, and is in no way guaranteed.

There are already an abundance of marketed medicines to treat AML, with more in development. And players like CRISPR Therapeutics and Bluebird Bio could both get their candidates, which are both functional cures for SCD, approved by the Food and Drug Administration (FDA) in December of this year. Beam would thus be arriving at the market many years late, assuming it arrives at all.

It's not all bearish

Aside from the competitive risks, another key concern for investors is whether Beam will have enough gas in the tank to survive long enough to get one of its programs commercialized and generating revenue. In October, it cut its workforce by 20% and lowered the priority of several of its pipeline programs. It currently has a cool $1 billion in cash, equivalents, and marketable investments.

It also just sold Eli Lilly some of the commercialization rights associated with its existing collaboration agreement with Verve Therapeutics for $200 million up front, a $50 million equity investment, and the chance to realize up to $350 million in milestone payments over the coming years. And last year, it entered into a collaboration agreement with Pfizer on a range of rare diseases.

With its cash hoard and the proceeds in hand from the sale of those rights to Eli Lilly, Beam calculates that its runway should last it through sometime in the second half of 2026. That estimate seems relatively conservative given its recently scaled-back plans for advancing its pipeline programs and its usage of cash. By the standards of pre-revenue biotech stocks, having around three years of money in the bank counts as being well-capitalized.

So is Beam a buy now on the basis of its decent balance sheet and its pipeline? For the median investor, no. The competitive risks would be bad enough on their own if the company didn't also carry a significant amount of risk stemming from its clinical trials.

On the other hand, if you are looking for a speculative early-stage biotech bet to hold for the long term, this business is one of the few options that'll almost certainly survive the next three years. That doesn't mean its shares will go up, but at least they'll have a solid shot at reaching the catalysts that could drive big returns.

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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beam Therapeutics, CRISPR Therapeutics, and Pfizer. The Motley Fool recommends Bluebird Bio. The Motley Fool has a disclosure policy.

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