Summary
- Black Diamond is an innovative cancer drug-developer using genetic sequencing to identify families of allosteric mutations, and developing drug molecules to inhibit their proliferation.
- The company raised >$200m via a January IPO, and shares have traded at a substantial premium to IPO price ever since.
- Management is due to post preclinical data relating to its lead candidate BDTX-189 - targeting HER2 and EGFR - in a couple of days' time.
- This could be an exciting near-term price catalyst - although the company's approach is relatively untested, some of the data generated to date has shown promise.
- Long term, the company ought to generate multiple candidates - and could become a leading player in an exciting new market for tumor-agnostic cancer treatment. I am bullish.
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Investment Thesis
Black Diamond Therapeutics (BDTX) stock is currently trading at a 58% premium to its January IPO price of $19, but a 33% discount to its mid-July peak of $45.
The company is pioneering a new approach to treating cancers, using its proprietary Mutation-Allostery-Pharmacology ("MAP"), platform. MAP analyses genetic sequencing data looking for oncogenic mutations in the allosteric sites of proteins that can cause cancers, and groups these mutations into families that can be targeted together by a single, tumor agnostic, small molecule drug. Using this technique, Black Diamond has developed 2 candidates to date, and will provide data readouts from preclinical trials of lead candidate BDTX-189 at a scientific conference on 24th/25th of October.
Black Diamond has numerous institutional backers, and it is well-funded, with an experienced management team at the helm. It is focused on an exciting area of drug development that builds on the progress of drugs, including Tyrosine Kinase Inhibitors and Merck's (NYSE:MRK) best-selling cancer treatment Keytruda, that are capable of addressing cancer treatment using a genetic, rather than a tissue-specific approach.
I think Black Diamond presents an interesting investment opportunity, with a promising near-term catalyst in play, and a data-driven approach that ought to be capable of generating multiple drug candidates.
It is early days for the company, and any investment therefore involves a high level of risk, but having already secured a fast track designation from the FDA for BDTX-189, Black Diamond, in my view, is building momentum in a field with a vast addressable market, that could come to represent a new paradigm in the way solid tumors are treated.
In the rest of this article I will provide more information on the company, its science and technology platform, candidates, and competition, and highlight some risks to be aware of. I think a reasonable entry point for this stock is $30-35, with near-term upside of potential of $45-50, and over a 3-5 year period, based on the size of the opportunity, I believe the company's shares have high chances of reaching three-figures.
Company Overview
Black Diamond's IPO raised ~$231m via the sale of 12.2m shares, above the company's original target of selling 8.9m shares at $16-18. Prior to listing, the company raised ~$197m across four private funding rounds, with participants in the final round including RA Capital Management (current stake = 7.2% per Fintel), Wellington Management, Boxer Capital (current stake = 5.6%), New Enterprise Associates (9.6% stake) and Versant Venture Capital (17.7% stake).
Black Diamond was founded in 2014 by Dr. David M. Epstein, and Dr. Elizabeth Buck. Epstein was formerly Associate Professor in Cancer & Stem Cell Biology at Duke-NUS Medical School, Singapore, and before that, Chief Scientific Officer at cancer and diabetes drug-developer OSI Pharmaceuticals - which was acquired by Japan-based Astellas Pharma (OTCPK:ALPMF) in May 2010, in a $4bn all-cash deal. Buck was formerly Assistant Director of Advanced Preclinical Pharmacology at OSI Pharmaceuticals. The company's COO, CSO, and CMO all come from publicly traded biotech backgrounds, and each have 20+ years of biotech industry experience.
The company's MAP platform was developed in partnership with its current largest shareholder, Versant Venture Capital, and its Chief Business Officer, Fang Ni, was a Versant employee prior to joining the company. Versant also has 2 employees sitting on Black Diamond's Board of Directors, alongside representatives from RA Capital Management and New Enterprise Associates. Chairman of the Board is Robert Ingram, of Hatteras Venture Partners, whilst Samarth Kulkarni - CEO of CRISPR Therapeutics (CRSP) and Garry Menzel, President and CEO of TCR2 Therapeutics (TCRR) - both leading figures in the gene-sequencing field - are also board members.
Black Diamond is headquartered in Cambridge, Massachusetts, and incorporated in Delaware. It has no manufacturing facilities, and limited experience of managing clinical trials, meaning it will be reliant on third-party contractors to handle these elements of its business.
