Blueprint Medicines Corp. (BPMC:NASDAQ) entered financing agreements with Sixth Street investment firm and with Royalty Pharma for up to $125 billion, "of which Blueprint will receive $575 million ($575M) at close," reported Wedbush analyst Dr. David Nierengarten in a July 1 research note.
"We view these deals as a positive for Blueprint," Nierengarten wrote.
Wedbush updated its model on Outperform-rated Blueprint to take these agreements into account. This resulted in a lowering of Wedbush's target price on the precision therapy firm to $128 per share from $129. This compares to Blueprint's current share price of around $54.28.
According to the terms of the agreement between Blueprint and Sixth Street, the investment firm is to provide the biopharma with the following:
1) $250 million ($250M) for a 9.75% royalty on Ayvakit and BLU-263 sales with an annual net sales cap of $900M and a cumulative cap of 1.45x return on invested capital. Nierengarten noted Blueprint believes it can meet the cap, which will require about $3.7 billion in Ayvakit sales. If the company fails to reach it by an unspecified date, the cap increases to 1.85x. After it hits the cap, Blueprint will receive all Ayvakit sales revenue.
2) access to $400M in a senior secured credit facility, from which Blueprint intends to initially draw $150M.
3) access to a potential $260M credit facility to support future buy-side business development efforts subject to agreement by both parties.
The second agreement calls for Royalty Pharma to pay Blueprint $175M upfront plus $165M in potential milestone payments based on sales of Gavreto in exchange for Gavreto royalty receivables from Roche garnered outside of the U.S. but not in Greater China.
Nierengarten wrote the monetization of ex-U.S. Gavreto royalties is especially favorable to Blueprint "as we believe investors were not valuing those payments at all."
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Disclosures for Wedbush, Blueprint Medicines, July 1, 2022
Analyst Certification: We, David Nierengarten and Dennis Pak, certify that the views expressed in this report accurately reflect our personal opinions and that we have not and will not, directly or indirectly, receive compensation or other payments in connection with our specific recommendations or views contained in this report.
The Distribution of Ratings is required by FINRA rules; however, WS' stock ratings of Outperform, Neutral, and Underperform most closely conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS' stock ratings are on a relative basis. The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. The analysts receive compensation that is based upon various factors including WS' total revenues, a portion of which are generated by WS' investment banking activities.
Company Specific Disclosures: 1. WS makes a market in the securities of Blueprint Medicines.
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