News

Summary

• Preclinical irreversible small molecule concern, Biomea Fusion, Inc., has lost 40% of its share value since its April 2021 IPO, suffering from a lack of news rather than bad.
• The company’s covalent bonding compounds offer advantages over reversible oncology therapeutics, which could lead to higher efficacy, as well as better safety and tolerability profiles.
• With its first IND expected to be filed soon and recent beneficial owner buying, this busted IPO merited a deeper dive.
• A full investment analysis follows in the paragraphs below.
• I do much more than just articles at The Busted IPO Forum: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Surprise makes brave men cowards, strong men weak, wise men fools.”― Joe Abercrombie

Today, we look at a small developmental concern. While the stock debuted on the markets earlier this year, it is already significantly in 'Busted IPO' territory. A full analysis is below.

Company Overview:

Biomea Fusion, Inc. (NASDAQ:BMEA) is a Redwood City, California-based preclinical-stage biopharmaceutical concern focused on the development of irreversible small molecules to treat patients with genetically-defined cancers. The company plans to file an IND for its first compound, BMF-219, which will target liquid and solid tumors that are highly dependent on menin, a scaffold protein that controls gene expression and regulates multiple signaling pathways. Biomea was formed in 2017 and went public in April 2021, raising net proceeds of $152.8 million at $17 per share. The stock trades for just over $10.00 a share, translating to a market cap of $290 million.

FUSION System Platform

Part of the management team at Biomea came from Pharmacyclics, which was acquired by AbbVie (ABBV) in 2015 after it developed ibrutinib, an irreversible inhibitor of Bruton tyrosine kinase, which is used for the treatment of chronic lymphocytic leukemia, amongst other indications. Its expertise in structural biology and irreversible binding chemistry has been leveraged to construct a platform that generates unique chemical scaffolds that target specific tumor proteins.

These irreversible biding compounds offer several advantages over reversible therapeutics, namely higher selectivity, deep-target inactivation, and a more sustained effect. Higher selectivity stems from both covalent and non-covalent bonding interactions versus reversible binding compounds, which rely only on non-covalent bonding. As such, therapeutics generated from Biomea’s platform provide the potential to reduce off-target adherence, which can lead to safety and tolerability issues that menace reversible binding compounds. Irreversible binding should cause permanent inactivation of the targeted protein, which should actuate apoptosis or differentiation into a normal cell. Because of the permanent nature of the bond, the patient does not have to be constantly exposed to the drug, meaning lower dosing and an additional reduction in unwanted safety and tolerability challenges inherent in systemic exposure.

With that said, if creating irreversibly binding compounds were so easy, everyone would be doing it. Irreversibly binding compounds that go rouge and permanently affix to off-target proteins could create significant safety problems. As such, many drug developers do not pursue this avenue of therapy. It is Biomea’s knowledge of proteome structures and complex scaffold construction, as well as its understanding of which proteins have properties receptive to irreversible binding that differentiate it from its competitors, creating (what the company believes to be) a significant barrier to entry.

BMF-219:

The company will get to test its hypotheses once it enters the clinic, which it expects to do soon as its investigational new drug [IND] application for BMF-219 was just approved by the FDA. BMF-219 is an oral irreversible inhibitor of menin, a transcriptional regulator that promotes ontogenetic signaling in multiple cancers. The protein-protein interaction between menin and mixed lineage leukemia (MLL) fusion proteins is believed to play a role in the proliferation of many leukemias as well as the propagation of many solid tumors, including brain, liver, pancreatic, breast, and colon cancers. To date, BMF-219 has been well-tolerated and has demonstrated robust anti-tumor activity in animal models of both liquid and solid cancers, including up to an 80% reduction in readout genes influential in the spread of acute myeloid leukemia (AML) at six hours and a ~95% reduction at 24 hours. The effect was both dose-dependent and elevated at 24 hours after administration as compared to reversible menin inhibitors, whose effect diminishes significantly one day post-administration. Assuming a green light from the FDA, AML will be BMF-219’s first menin indication in the clinic. In addition to AML, preclinical studies are being conducted for diffuse large B-cell leukemias. If that avenue demonstrates promise when results are readout in 1Q22, it will likely lead to a second clinical indication. Biomea is also studying this menin-inhibition approach in the treatment of Type 2 diabetes. Those results were also anticipated in 1Q22.

In the U.S., MLL rearrangements are responsible for between 5% to 10% of AMLs, or ~1,000 to ~2,000 patients annually. NPM1 mutant AML, representing an annual domestic population of ~6,000, is also dependent upon the menin-MLL interaction. Inhibiting the menin-MLL interaction has become increasingly popular amongst biopharmas, with Syndax Pharmaceuticals (SNDX) and Kura Oncology (KURA) advancing compounds into the clinic. Also, MLL-rearrangement therapies are undergoing clinical study, sponsored by Kronos Bio (KRON), Epizyme (EPZM), and Novartis (NVS). However, there are currently no approved therapies targeting menin, and all those presently in the clinic are reversible inhibitors.

Balance Sheet & Analyst Commentary:

Owing to its IPO, Biomea held unrestricted cash and short-term investments of $198.6 million and no debt. The company is on pace to burn only $30 million in 2021, but that is a function of no clinical activity. Assuming BMF-219 enters the clinic in early 2022, the company should have a runway into mid-2023.

Not surprisingly, the three bankers involved in the IPO – JPMorgan (outperform), Piper (outperform), and Jeffries (Buy) – initiated coverage on Biomea in May, all with positive outlooks and a median twelve-month price objective of $26 per share.

They are not the only ones bullish on Biomea, as CEO Thomas Butler, who also represents the interests of beneficial owner Point Sur Investors, purchased 28,000 shares at an average price of $10.78 during August 17th and 18th. Collectively, Point Sur holds a 17% ownership interest in Biomea, with CEO Butler possessing ~310,000 shares in his personal account. COO Rainier Erdtmann, who is also tied to Point Sur, holds ~76,000 shares directly.

Verdict:

With no meaningful clinical efficacy data due for at least a year or more, Biomea is subject to the whims of the market and as such, has lost 34% of its value since making its public debut in April 2021. As with so many busted IPOs in the biotech space, it is not negative data but rather news vacuums that erode enthusiasm for the initial investment thesis, which in turn impacts market valuation. With nearly $200 million in cash, the market is assigning a value of ~$90 million to Biomea’s novel development platform, which appears cheap. However, the bet here is that the stock will settle in around the $10 level and stay there for the next twelve months, short of an unexpected event like a collaboration. With meaningful advantages over reversible approaches and the potential for much higher efficacy, Biomea deserves consideration, just not right now, as there is little to get excited about over the ensuing twelve months.

Disappointment has quite a penchant for taking one by surprise.”― Pawan Mishra

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum

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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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