Global Blood Therapeutics (NASDAQ: GBT) is a biopharmaceutical company that develops and commercializes advanced therapies for patients with blood-based diseases. The company’s primary focus is an oral therapy – GBT440 – which is used to treat individuals suffering from sickle cell disease. GBT440 is currently in placebo-controlled Phase I and Phase II clinical trials that compare treatment results from healthy individuals and those with sickle cell disease. Early positive results have helped GBT440 receive Fast Track designation from the Food and Drug Administration as a needed medical treatment for sickle cell diseases by normalizing hemoglobin function in the blocking of polymerization. Additionally, Global Blood Therapeutics is actively researching potential therapies for hypoxemic pulmonary disorders such as idiopathic pulmonary fibrosis (IPF) and hereditary angioedema (HAE). At the American Heart Association Scientific Sessions, Global Blood Therapeutics released preclinical proof of concept for GBT1118, a hemoglobin modifier that improves oxygen delivery to tissues for patients with acute and chronic long disorders.
On August 17, 2015, Global Blood Therapeutics closed its initial public offering of 6.9 million shares, including an underwriters’ overallotment option on 900,000 shares, at $20 per share. The $20 price was above the high end of its initial IPO pricing range of $16 – $18 per share. The company generated net proceeds of about $126.1 million from the offering. On Global Blood Therapeutics first day of trading (8/12/2015), shares opened at $34.65, up about 73% from the IPO price, and closed at $43.11, up about 116% from the IPO price – making this a really successful IPO.
As of market close on November 20, 2015, Global Blood Therapeutics’ shares were trading at $51.85, up about 159% from the company’s IPO price of $20 and up 20% from the company’s closing price of $43.11 on the first day of trading. In three months of public trading, shares have climbed as high as $57.00 and fallen as low as $33.01, well above the IPO price and reflective of Wall Street’s belief in the underlying value of the company’s technology. Morgan Stanley initiated coverage on the company with an Overweight rating and a $67 price target (29% potential upside) while Cowen & Co. initiated coverage with an Outperform rating and an $80 price target (54% upside).
For its third quarter financial (the three months ended September 30, 2015), Global Blood Therapeutics reported zero revenue (none of its products or services generate revenue at this stage), total operating expenses of $14.8 million, up 184% year-over-year, with research and development accounting for $12.1 million or approximately 82% of expenses. For Q3 2015, Global Blood Therapeutics recorded a net loss of $15.6 million, or $0.90 per share. With proceeds from investments and its IPO, as of 9/30/15, the company held $158.5 million in cash, zero debt and $154.8 million in shareholders’ equity, well below its $1.6 billion market capitalization which reflects future upside once its key treatments are approved for sale.
The company recently announced a credible addition to its Board with the appointment of Philip Pizzo, the former Dean of the School of Medicine at Stanford University where he excelled on both academic and professional fronts. With this latest addition, the company’s Board now has seven directors.
Ted Love has over 20 years of pharmaceutical leadership experience and leads Global Blood Technologies as Chief Executive Officer. Love oversaw the Phase III completion and marketization of several drugs for Onyx Pharmaceuticals, Nuvelo Inc. and Genentech. Jung Choi is Chief Business and Strategy Officer, and holds responsibility for all activities and strategies to promote successful clinical results and drive growth for the company. Earlier, Choi was an integral part of over $13 billion in transactions at Genentech, Chimerix Inc. (CMRX) and Gilead Sciences (GILD). Eleanor Ramos brings over two decades of biopharmaceutical industry experience with a strong background in developing portfolios that achieve Phase III approval. She has worked for Theraclone Sciences, ZymoGenetics and Bristol-Myers Squibb (BMY).
Global Blood Therapeutics has an addressable market of over 300,000 individuals in the U.S. that suffer from blood diseases that currently have no suitable treatments. In the first half of 2016 (1H16), the company expects to complete clinical trials for its sickle cell treatment for adults, phase II trials of pediatric treatments and phase II trials of idiopathic pulmonary fibrosis (IPF) treatments. To close out FY2016, the company expects to complete phase I trials for its hereditary angioedema (HAE) treatments.
If Global Blood Therapeutics successfully gets these treatments to market, it will have exclusive control of worldwide commercial rights, a key advantage for pharmaceutical companies that lets them enjoy monopoly profits for the life of the initial patent. Research and development expenses are expected to weigh on the company’s finances at this pre-revenue clinical trial stage but the company’s strong balance sheet leaves it well positioned to push its pipeline to market. With the completion of an IPO, the company has $163 million in total assets with only $8.2 million in total liabilities. As with all newer pharmaceutical companies, product development and approval by regulatory bodies remains the largest risk for Global Blood Therapeutics. Healthcare reform should be on the side of the company as it develops treatments for individuals that are in dire need of remedies for their respective diseases. Analysts are confident that Global Blood Therapeutics’ technology and experienced leadership team can successfully navigate the trial and regulatory approval process, and deliver on its portfolio of treatments in a timely manner. The company has an average consensus analyst price target of $71 and a high price target of $94, representing potential upside of about 37% and 81%, respectively. With the company still pre-revenue, any dip would represent a buying opportunity for investors with some risk appetite. The company does not pay dividends.