TD Cowen Downgrades 2Seventy Bio Inc. (TSVT) to Market Perform, 'Takeout Uncertain'

TD Cowen analyst Yaron Werber downgraded 2Seventy Bio Inc. (NASDAQ: TSVT) from Outperform to Market Perform.

The analyst comments "We are moving to the sidelines following this morning’s announcement of 2seventy’s strategic re-alignment plan. The company will be selling their entire R&D pipeline and platform technologies to Regeneron for $5M upfront to focus on returning Abecma to growth, which we view as prudent in the absence of a strategic buyer. This should tremendously reduce cash burn (annual savings of ~$150M in 2024 and ~$200M in 2025), extending cash runway beyond 2027, but net cash spend is still expected to be $80-100M for 2024. While restructuring is a move in the right direction for 2seventy given recent difficulties, it also undercuts our thesis, which was based on the potential of their early CAR T pipeline (especially bbT369). The company’s commercial outlook now hinges solely on Abecma, which is losing market share in the face of increasing competition from both Carvykti and bispecifics (with several other promising CAR T competitors in development). Given our longstanding view that Abecma will face commercial headwinds, we are now moving to the sidelines as the stock is a pure play. Expansion into earlier lines is now more of a priority than ever, and the results of the upcoming ODAC for Abecma’s 3L+ approval (likely in late February/early March) will be key for the stock. We do believe that Abecma will garner approval given its overall profile and that is not the reason for this downgrade. However, the long-term outlook remains cloudy even with 3L approval, given that Carvykti is poised to move into 2L MM ahead of Abecma (April 5, 2024 PDUFA). More so, as a pure play, the future pivots on Abecma and we see a takeout by BMS or another strategic as the most likely positive outcome for investors. In a way, today’s deal does make it easier for a strategic to step in for Abecma. But we see BMS as most obvious buyer and the future is uncertain given the challenges to the brand. Taken together, we are downgrading to Market Perform."

For an analyst ratings summary and ratings history on 2Seventy Bio Inc. click here. For more ratings news on 2Seventy Bio Inc. click here.

Shares of 2Seventy Bio Inc. closed at $3.49 yesterday.

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