What happened
Shares of bluebird bio Inc. (BLUE -2.73%), a clinical-stage biotech developing cell-based therapies, soared 40% in August, according to data from S&P Global Market Intelligence. A generous takeover offer for an industry peer and an FDA approval for another treatment boosted the market's confidence for bluebird's pipeline.
So what
Bluebird bio's development pipeline is full of experimental therapies that involve modifying a patient's own cells before reintroducing them. Last month, Gilead Sciences (GILD -0.56%) shook up the industry with an $11.9 billion buyout offer for Kite Pharma (NASDAQ: KITE), another clinical-stage biotech developing cell-based therapies similar to those in bluebird bio's pipeline. Gilead is notorious for both success and prudence when it makes big purchases, which is why announcing a deal for Kite provided a big lift for related stocks.
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A few days later, the FDA delivered a landmark approval for Kymriah, a cell-based treatment for younger patients suffering from a difficult-to-treat form of leukemia. This therapy from Novartis is the first chimeric antigen receptor T cell (CAR-T) therapy to earn approval, and it's expected to cost around $475,000 for the one-time infusion.
Although bluebird bio is also developing therapies for beta thalassemia and sickle-cell disease, it has a CAR-T in clinical trials as a potential treatment for multiple myeloma, a fairly common type of blood cancer. Bluebird's multiple myeloma candidate, bb2121 aims for a different target on cancer cells than Kymriah, but Novartis' success greatly heightens the odds of its approval in the eyes of most investors.
Now what
While clinical-stage biotech stocks are generally volatile, I think we can expect bluebird bio to be bouncier than most for the next several quarters. Remember, the company hasn't proven any of its drugs can earn an approval, much less succeed in a commercial setting.
Cell-based therapies such as bluebirds must overcome a logistical nightmare that involves removing, shipping, modifying, returning, and reintroducing patient immune cells. Until bluebird bio can prove one of its own therapies can earn an approval, and overcome these logistical challenges you can expect this stock to move like a yo-yo tethered to biotech peers operating in the same arena.
