Buy Beam Therapeutics For 2023 (NASDAQ:BEAM)

When Beam Therapeutics (NASDAQ:BEAM) reported third-quarter results on Nov. 7, 2022, shares briefly rallied. BEAM stock lost momentum at the $50 resistance established in late Sept. 2022. Short sellers are still in control, holding a decisive 22.51% short interest against the stock.

What do bears know that shareholders do not? Investors sold the iShares Biotechnology exchange-traded fund (IBB) in the fourth quarter of 2021. The ETF has since bottomed as the market’s appetite for risk increased.

About Beam Therapeutics

Beam is a biotechnology research firm in the gene therapy and genome editing segment. Its vision is to create life-long cures by editing genes.

The firm is in an out-of-favor segment. Like BEAM stock, CRISPR Therapeutics (CRSP) rallied to as high as ~ $65 in mid-November only to close at $54.34. Editas Medicine (EDIT) is only 4.9% above its 52-week low. And Intellia Therapeutics (NTLA) lost 11% in value on Dec. 1, 2022, when it announced a $250 million public offering.

Intellia is an early-stage biotechnology firm that is a long way from generating profits. Same for Beam Therapeutics, which reported a $1.56 per share loss on revenue of just $15.79 million.

Strong Cash Levels in Q3/2022

Beam ended the quarter with $1.1 billion in cash and cash equivalents. Importantly, cash rose from $965.6 million as of December 31, 2021. Cash burn levels are manageable. It spent only $21.8 million in general and administrative expenses. Beam posted research and development expenses of $85.3 million.

Chief Executive Officer John Evans said that its BEACON trial for BEAM-101 is its top priority. It will focus on screening and site activation efforts to enroll its first sickle cell patient by the end of this year.

Investors are disappointed that Beam did not file an investigational new drug (“IND”) application for BEAM-102. Previously, the company said in an August press release that it expected a submission for it. Under the pipeline updates, Beam wrote that “BEAM-102 continues to progress, and the company plans to submit an investigational new drug (“IND”) application for BEAM-102 for the treatment of SCD in the second half of 2022.”

The company will have to make up for the missed deadline by advancing its BEACON trial to the next phase. After Wave 2 for non-genotoxic conditioning, it will have a Wave 3 strategy for in vivo lipid nanoparticle delivery of base editors.

Opportunity

Biotech investors benefit from assessing the rest of the company’s pipeline. For example, investors reward Moderna (MRNA) stock with a higher market capitalization over BioNTech SE (BNTX). Moderna has vaccines for other diseases besides Covid in its pipeline.

Beam is developing treatments beyond hematology. It has BEAM-201 in immune cell therapies. Per Beam’s press release, this is an IND for treating relapsed/refractory T-cell acute lymphoblastic leukemia (T-ALL)/T-cell lymphoblastic lymphoma (T-LL).

The company submitted the BEAM-201 IND in June. Its research could yield the best-in-class platform for allogeneic cell therapies. Beam accomplishes this through multiplex base editing. As a result, the treatment could deliver an excellent and more durable response.

BEAM-301 targets a genetic mutation in vivo in the BEAM-301 study.

BEAM-302 potentially treats alpha-1 antitrypsin deficiency (“AATD”). It corrects DNA in vivo on the E342K mutation.

Quant Stock Rating

Seeking Alpha Premium issued a buy rating on the stock at least three times. More recently, the quant system rated the stock a hold.

As always, readers should appreciate the cautious quant rating. By comparison, Wall Street analysts issued a ‘strong buy’ rating at the beginning of 2022.

As shown above, analysts kept the bullish rating at the end of March. Shares traded as high as $62.36 at the time.

Shareholders are optimistic that the company’s growth and profitability potential will offset its valuation risks.

On a closer examination, Beam earned an A+ growth grade from unsustainable revenue growth of over 11,600%:

Investors cannot predict when its license and collaboration revenue will soar. Expect Beam to post growing losses as R&D spending and other costs exceed such revenue sources.

Other Risks

Growing losses will hurt Beam’s valuation for at least a few quarters. This is typical for biotechnology companies. Unfortunately, the market’s willingness to pay for potential growth is unpredictable. The sentiment is driving the market movements now.

Your Takeaway

The market is increasingly willing to take bets on biotechnology firms again. The IBB ETF is only 12% below its 52-week high. Market sentiment is on the cusp of risk-taking again. The Federal Reserve indicated it will slow its interest rate increase in its Dec. 13-14, 2022 meeting.

After tax-loss selling for 2022, investors might consider Beam Therapeutics among the biotech firms to buy in 2023.