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Bioverativ (BIVV - Free Report) is a biotechnology company focused on the discovery and commercialization of innovative therapies for the treatment of hemophilia and other rare blood disorders.

The company was spun off from Biogen (BIIB - Free Report) in February of this year and reported its first full quarter as a stand-alone company in early May.

Bioverativ is focused on becoming a leading hematology rare disease company. Its approved products include long-acting replacement clotting factors Eloctate for Hemophilia A and Alprolix for Hemophilia B.

Debut Quarterly Report

On May 3, Bioverativ delivered top and bottom line beats and generated over $100 million in cash from operations. In its first report, the company pleasantly surprised investors with non-GAAP 1Q17 EPS of $0.68, well ahead of consensus $0.62. Total revenue of $259 million was +35% year-over-year and easily beat the consensus of $249 million.

Some analysts moved estimates higher after that report. But three weeks later, after the company announced a new acquisition, estimates came down more significantly, pushing the stock to a Zacks #5 Rank (Strong Sell).

These adjustments may be due in part to analysts still getting a firm handle in their models of Bioverativ's sales, expenses, and taxes. Most still rate the company a buy and late May's news only confirmed their longer-term view of the share price and value.

In the past few weeks, full-year 2017 earnings estimates dropped from $2.65 to $2.33. And next year's profit projection fell over 15% from $3.13 to $2.64.

A Bid for Rare Treatments

On May 23, Bioverativ announced that it would be acquiring privately-held, clinical-stage rare disease biotech company True North Therapeutics for $400 million upfront plus assumed cash. The company will also shell out as much as $425 million on the achievement of development, regulatory and sales milestones.

With this acquisition, which is scheduled to close in mid-2017, Bioverativ will add TNT009 to its pipeline. TNT009, True North’s lead candidate, is being evaluated for the treatment of cold agglutinin disease (CAD), a rare and chronic hemolytic condition affecting about 16 people per million globally including 5,000 people in the U.S. There are currently no approved treatments for CAD.

The FDA has granted TNT009 with Breakthrough Therapy Designation as well as Orphan Drug Designation. There are an estimated 5,000 CAD patients in the U.S. and about the same in the EU. Given there is no cure, a lifetime of treatment is expected.

With a potential treatment cost of $100,000 per year, CAD looks like a good pipeline addition for BIVV. Some analysts believe that a price as much as five times this level could be economically feasible if clinical data are compelling.

While we wait for that data, we can also sit out this stock for another quarter until the earnings estimates stop going down and start heading back up.

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