bluebird bio (BLUE 12.59%) is a biotech company that specializes in gene editing, a technology that allows scientists to modify the genetic material of living organisms. Gene editing has the potential to produce life-changing therapies for conditions for which there are few (if any) treatment options. As a company that employs this technology to develop new medicines, Bluebird could deliver market-beating returns in the long run.

Further, Bluebird's stock has taken a beating of late; the company's shares are down by 36% year over year, compared with gains of 6% for the S&P 500. It could be tempting to think that Bluebird's shares must be worth buying at current levels. But before making any definitive decision, let's dive a little deeper into the company's business and figure out whether it is truly worth investing in the biotech today. 

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Zynteglo leading the way

In its financial results for the second quarter, which ended June 30, Bluebird reported revenue of $199 million, a steep jump from the $13 million it recorded during the prior-year quarter. None of this revenue came from product sales, though; most of it was thanks to a collaboration agreement with Bristol Myers Squibb (BMY 0.28%).

Bluebird's sole approved product at the moment is Zynteglo, a treatment for a blood disorder called transfusion-dependent beta-thalassemia (TDT). Patients who suffer from this condition produce insufficient levels of beta-globin, an element of a protein in red blood cells called hemoglobin that carries oxygen in the body. Before the June 2019 approval of Zynteglo by the European Medicines Association (EMA), TDT patients could only be treated by receiving regular blood transfusions. However, more than a year after it received regulatory approval, Bluebird has yet to treat any patient with Zynteglo. 

That's because providing this therapy is no easy task. As management put it in a news release: "Due to the highly technical and specialized nature of administering gene therapy in rare diseases, bluebird bio is working with select qualified treatment centers that have expertise in stem cell transplant and treating patients with TDT to provide Zynteglo." In other words, the company needs trained partners to administer the drug. Bluebird has been launching Zynteglo throughout Europe, and the company does expect to treat its first commercial patient during the second half of 2020.

Zynteglo should provide great value to patients because it only needs to be administered once. After that, the patient no longer needs regular blood transfusions. And while a course of Zynteglo costs a hefty 1.58 million Euros (roughly $1.87 million at the current exchange rate), Bluebird has established an installment plan whereby patients pay 315,000 Euros upfront, and four additional payments of the same amount if the treatment works. How much money could Bluebird make thanks to Zynteglo in the European Union (EU)? 

Smiling female pharmacist standing inside a pharmacy.

Image source: Getty Images.

The company estimates that TDT affects one person out of 100,000. Also, Zyneglo is only approved for TDT patients 12 years and older "who do not completely lack beta-globin and who are eligible for stem cell transplantation but do not have a matching related donor." Given that the population of the EU currently stands at 446 million, let's assume 1,000 patients will be successfully treated with this therapy in Europe. At $1.87 million per patient, the company could rack up $1.87 billion. With that said, Bluebird would be earning this amount over several years because of its installment-plan offering, a factor which lowers the value of these future cash flows. 

Looking at Bluebird's pipeline

Bluebird expects to receive regulatory approval for Zynteglo in the U.S., where it will be known as LentiGlobin. The company applied for a Biologics License Application (BLA) from the U.S. Food and Drug Administration (FDA) for the treatment late last year. Bluebird used the rolling submission option, which allows a company to submit completed sections of its BLA for review, as opposed to submitting every completed section at once. However, management announced in March that the process had been delayed due to some disagreements with the FDA and the impact of COVID-19.

Bluebird now expects to complete this process by mid-2021. The company is also developing Zynteglo as a treatment for another blood disorder called sickle cell disease (SCD). There are few effective therapy options for this disease, and the ones that exist include blood transfusions and drugs for pain associated with it.

Back in June, Bluebird released some data from a phase 1/2 study for LentiGlobina as a treatment for SCD. Management said they witnessed a "near-complete elimination" of vaso-occlusive crises (VOC) in SCD patients during the trial. VOCs are common side effects of SCD characterized by acute pain. Lastly, Bluebird and Bristol Myers Squibb are developing a cancer treatment called ide-cel. The two companies submitted a BLA to the FDA for this drug back in July. Given all this, Bluebird could have an approved product on the market in the U.S. sometime next year. 

The verdict

Unlike many other biotech companies that focus on gene editing, Bluebird has already managed to launch a treatment of this kind on the market. Also, the company has other promising candidates in its pipeline. Bluebird ended the second quarter with a strong cash and cash equivalent balance of $1.6 billion, and considering it just raised funds through a public offering of common stock back in May, I don't expect the company to issue new shares anytime soon.

Bluebird's master plan will likely take some time to fully form. After all, the company was founded in 1992 and did not receive its first approval until 27 years later. The process of developing life-changing treatments using a relatively novel technology isn't easy -- or cheap. But for investors willing to be patient, and who are ready to park Bluebird's shares in their portfolios for the long haul, I think this biotech stock is worth serious consideration.