While the market is hitting all-time highs, shares of the Nasdaq Biotechnology ETF (IBB 0.41%) are trading essentially flat year-to-date, down just over 15% from their peak. Down 11% since the beginning of the year, but up just under five times over the past five years , Blueprint Medicines (BPMC 0.46%) has two products on the market and a clear path to continue to achieve big gains for investors in the future.
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Others make the copies, they make the blueprint
Blueprint Medicines is the first and only company to have two internally discovered and developed medicines that received U.S. Food and Drug Administration (FDA) approval within a decade of founding. Not bad for a company with a market cap of only $5.4 billion. And now, it has plenty of cash and a few more potentially blockbuster ideas up its sleeve.
First, let's start with the two drugs that have already received approval. Ayvakit was approved for rare forms of a type of stomach cancer in January 2020. While sales have been nearly nonexistent so far, the company hopes for expanded labeling, this time for use against mastocytosis.
Mastocytosis is a disease that causes certain immune cells to build up in certain organs; it can affect intestines, bones, the skin, and everything in between. There are an estimated 2,000 patients diagnosed in the U.S. annually with mastocytosis, and at a price tag of $384,000 per patient annually, that is a total addressable market of at least $750 million.
Next is Gavreto, a once-a-day oral medication that will compete with Eli Lilly's (LLY -0.24%) Retevmo for non-small cell lung cancer and certain types of thyroid cancer with a mutation in a specific gene called RET. Between these two indications, there are about 6,000 patients. At a cost of $231,000 per patient annually, that's a $1.3 billion addressable market.
Blueprint Medicines did agree to split costs and profits 50/50 in the U.S. market for Gavreto with Roche (RHHBY -0.80%) last summer. Roche also agreed to pay Blueprint Medicines tiered royalties of somewhere between 15% and 25% on sales outside the U.S. and Roche also gave Blueprint Medicines a huge infusion of cash ($675 million up front). Blueprint Medicines will be eligible to receive up to an additional $927 million should certain milestones be accomplished. Between Ayvakit and Gavreto , the company should be able to at least come close to breaking even financially within the next few years.
Blazing a path forward
Blueprint Medicines has unveiled a handful of programs to make the company a force within the field of precision oncology. It has two candidates targeting non-small cell lung cancer driven by mutations within the EGFR gene, a market with 30,000 patients annually. Unfortunately, EGFR-driven non-small cell lung cancer becomes resistant to treatment over time, and patients often need to move on to second- and third-line treatments.
Using Gavreto's $231,000 as a reference point for an annual drug price, the total addressable market gives Blueprint Medicines a potential blockbuster on its hands. For comparison, AstraZeneca's (AZN -0.08%) EGFR inhibitor for non-small cell lung cancer, Tagrisso, hauled in close to $3 billion in FY 2020.
And finally, the company is looking to develop a drug for a historically difficult target protein, CDK2. When CDK2 is hyperactivated, cancer cells proliferate. This mechanism is seen as a driver of tumor growth across a variety of cancers, including uterine, lung, and breast cancer.
CDK2 targeted trials are starting in early 2022, and it's possible that Blueprint could aim for tumor-agnostic labeling, meaning that the company would ask the FDA to approve the drug for patients based on the molecular and genetic makeup of the patient's cancer rather than on the tumor's location. An example of tumor-agnostic labeling would be "CDK hyperactivated cancer" rather than "stomach adenocarcinoma." This would significantly increase the addressable market by providing a broad indication for the drug.
If it does receive a tumor-agnostic labeling, a path currently being successfully blazed by Eli Lilly and Bayer AG (BAYR.Y) for their own precision oncology medications, Blueprint Medicines would have yet another blockbuster on its hands.
Ready for the long haul
While there is reason for investor and patient hope in these future trials outlined above , Blueprint Medicines has demonstrated that its discovery platform works, and that it can quickly move compounds through trials. Not only that, but the company can fuel its future pipeline with today's approvals. When healthcare investors get their tax returns this spring, they may want to consider adding Blueprint Medicines to their watch lists while it's still under the radar.
