Beam Therapeutics: Value Watching As a result of Of Pfizer Curiosity? (NASDAQ:BEAM)


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A major consideration for early stage biotech investors is your exit strategy. The path from discovering a new drug/treatment and getting it to market is long and costly. There is a never ending cash drain that inevitably means dilution, often at a discount if the company is not clever about capital raising. Morgan Stanley (MS) recently reviewed cash needs of 380 biotech companies with market capitalization above $100 million and found that by end of 2022 about one third will require further cash, the total needed being $36 billion. That is a lot of potential dilution… I’m getting better at paring down prospects to those that have a good chance of the major uplift that investment in biotech looks for. Those who follow me will be aware that I’ve invested in Pfizer (PFE) because I think the company has benefited enormously from hitchhiking on BioNTech’s (BNTX) mRNA technology to become the market leader in COVID-19 vaccines with the Comirnaty vaccine. The BioNTech/Pfizer partnership has started to redefine Pfizer’s business, but it has also been a huge success for early BioNTech investors (up 1000% over the past 3 years for canny investors who exited at the right time).

Here I look at Beam Therapeutics (NASDAQ:BEAM) as another biotech company that might outperform through a partnership with Pfizer.

BEAM Therapeutics technology

Biotech companies come in many shapes and forms, one of which is companies that are formed to exploit emerging scientific breakthroughs that have the potential to transform medicine, and on the way provide outstanding returns for investors. BEAM is about editing DNA in a very precise way. Beam’s tagline is “Rewriting the genetic code one letter at a time”.

Beam’s website denotes key founders of the company. Beam’s technology for gene editing was developed in the labs of Beam founders Dr. David Liu and Dr. Feng Zhang at the Broad Institute of Harvard University and Massachusetts Institute of Technology, along with Dr. J Keith Young at Mass Gen Hospital and Harvard Medical School. Drs. Nicole Gaudelli and Alexis Komor are key inventors of the Beam gene-editing technology, which involves correcting individual mistakes (“point mutations”) in rare genetic diseases.

Beam has identified 5 types of deleterious DNA that can be corrected with their technology. These are :

i) Gene correction: fixing a mistake in a critical gene

ii) Gene modification : change a protein to reduce risk of disease

iii) Gene activation : change the sequence which controls gene “turn on”

iv) Gene silencing: put a “stop” signal to silence a protein

v) Multiple editing : introduce more than one change

Of critical interest to Pfizer, in addition to the gene editing technology, is Beam’s technology for delivering the editing technology. Beam is assembling 3 delivery technologies (electroporation for treating blood cells outside of the body, LNP technology for mRNA delivery to the liver and AAV (viral) technology for delivery to the eye and central nervous system). Pfizer and BioNTech have a lot of knowledge about mRNA delivery, and its interest in Beam’s delivery technology underlines the early stage of this core aspect of gene technology.

Make no mistake, BEAM’s technology is an emerging technology that might have a lot of pitfalls before becoming successful (or not). However, Beam has their own programs that are moving towards clinical trials. So in some areas at least they are moving beyond the lab. Beam lists 10 of its own programs. Four of these involve gene editing of blood cells outside of the body and one of these programs will enter a Phase 1 trial this year. Note that the six beam in vivo programs (modification in the body) are all at a very early stage of development.

Why Pfizer is interested

Pfizer has a significant interest in gene therapy, so it isn’t surprising that Beam’s precise gene editing technology has come to their attention. Earlier this year Pfizer articulated its roadmap for mRNA technology, and rare genetic diseases is a significant part of a 4 component roadmap. The interesting point for investors is that one of the top pharma companies has decided to put $300 million upfront to accelerate and hopefully derisk the emerging Beam technology as a core part of its mRNA technology-based gene therapy approach.

The Pfizer deal

Pfizer and Beam Therapeutics announced a 4-year partnership (with possible extension for a 5th year) in early January. Apart from a brief increase, the announcement hasn’t moved the needle on Beam’s declining share price, which is down 38.5% year on year. No doubt the market decided that, since the announcement did not herald an immediate commercial outcome, the company continued to be unworthy of attention.

The deal is interesting for the reasons I raise in the introduction to this article. Beam receives an upfront payment of $300 million (that’s a lot of money) and they are eligible for further milestone payments of up to $1.05 billion should Pfizer exercise an opt-in license for all 3 programs. Beam is entitled to receive royalties on global net sales for all three programs.

Beam gets an option to opt into a global co-development deal and co-commercialization agreement for one of the three joint programs. The money received by Beam is to substantially accelerate R&D concerning treatments for correcting specific rare genetic diseases. The partnership involves Beam providing its skills and know-how concerning gene editing and delivery technologies for mRNA using LNP (Lipid NanoParticles), while Pfizer’s drug development and commercialization skills will speed up getting discoveries to market. Intriguingly, Pfizer’s skills in mRNA and LNP delivery are also mentioned. I wonder if/how Pfizer’s partnership with BioNTech might become relevant in this program should the gene editing technology prove practical.

Three target rare genetic disease areas are mentioned: diseases of the liver, muscle and central nervous system. The precise targets are not disclosed, but they are new targets for Beam, not including diseases that Beam is currently working on. Pfizer has the option to take over development of each of the three target programs after which it will be responsible for all developmental activities, regulatory approvals and commercialization. At the end of Phase1/2 studies Beam can choose to pay an option exercise fee on one program and enter a global co-development and co-commercialization agreement, with the Pfizer/Beam share of net profits and also development and commercialization costs in a 65%/35% ratio. This gives upside for Beam should one of the three programs become partially de-risked.

Beam’s gene technology involves very precise editing of single bases and this avoids double strand breaks in the DNA that gene technology commonly involves. This is about as surgical as you can get with gene editing, but it is important for investors to be aware that this is at a very early stage, so there is a lot of technology risk.

Analyst views and major shareholders in BEAM

It isn’t surprising that Cathie Wood’s ARK, with a big interest in DNA technology and the Genomics Revolution, is the major shareholder in BEAM, with 11.7% held in ARK Investment Management LLC and a further 9.2% held in the ARK Innovation ETF ( ARKK). Vanguard has a significant 12.9% holding through 6.7% held by The Vanguard Group Inc. and a further 6.2% of holdings spread over four Vanguard Mutual Funds. BlackRock (BLK) Fund Advisors hold 5.3%. These are big and sophisticated players who are worth paying attention to, but it is worth remembering that Beam’s technology is not proven at this stage.

Professional advisors are enthusiastic about BEAM with 9 out of 12 Wall Street advisors in the past 90 days giving a strong buy rating, and just 3 with a hold rating. Seeking Alpha coverage is minimal with just 1 hold rating over the last 90 days.


Biotech investing is always challenging because there are so many variables in the technology itself, and the cost of developing new treatments is not small. There is an emerging theme of large corporations acknowledging that smaller more focused companies do better at technology innovation. It used to be that the big company would drip-feed the emerging company and, if the technology looked good, acquire it down the track. This often led to uncertainty for the small company and always ongoing cash crises. Recently Pfizer and Nestle (OTCPK:NSRGY) have changed the paradigm by substantially eliminating the cash problem, encouraging the innovator to go fast by not being cash constrained. It worked for the BioNTech/Pfizer COVID vaccine partnership, and I’ve indicated that I think it will probably work for Nestle through their investment in Seres Therapeutics (MCRB) microbiome technology. There seems to be a good chance that Seres’ SER-109 C. difficile treatment/prevention will get FDA approval soon. Investors might revisit my thoughts on MCRB as, even though it is in the doldrums presently, a potential uplift might come later this year.

The Beam Therapeutics partnership highlights another aspect of Pfizer’s ambitions in relation to mRNA technology. In the case of Beam the focus is not on vaccines, but instead the target is gene therapy. This is an area of ​​biotech that has seen a lot of hype and at this stage provides more hints of a transformational future rather that solid outcomes. My point here is that the highly targeted gene therapy used by Beam Therapeutics still has a long way to go, but Pfizer has removed a critical variable by providing the company with the cash to not have that worry about this critical part of biotech innovation. Of course, Beam has to be aware of their 10 in-house programs. The due diligence done by Pfizer gives an investor some confidence that this isn’t “snake oil”, but there is a way to go yet. My take-away is that Beam is worth watching to see how this develops, noting that if/when the technology becomes more concrete the rise in share price might make investors very happy. With Pfizer as a partner in a particular niche application, investors can have confidence that if it gets real, one of the industry’s best commercialization engines will drive success. With the Beam share price falling 28.2% over the past month, perhaps it might be worth considering whether this is an opportunity?

I am not a financial advisor but I understand the biotech industry. I hope my perspective helps you and your financial advisor in thinking about investment at the risky end of biotech.

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