bluebird bio (BLUE -4.91%) stock has fallen on hard times due to seemingly never-ending issues with its gene therapy, LentiGlobin. The stem-cell-derived transfusion is in phase 1/2 clinical trials for treating sickle cell disease (SCD) and received conditional marketing approval from the European Medical Agency (EMA) for targeting beta thalassemia. Both diseases are rare blood disorders causing hemoglobin anomalies.
Despite a heavy and consistent sell-off, I think Bluebird stock might be severely undervalued. Let's look at what investors are missing out on.
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What's going on?
In February, Bluebird halted sales of Zynteglo (LentiGlobin) as a beta-thalassemia treatment in Europe after the emergence of two possible cancer cases in its ongoing SCD study. After reviewing the serious adverse events last month, the company concluded they were not cancer and revised its diagnosis to transfusion-dependent anemia. It now expects the clinical trial to resume in June or July.
The good news was quickly overshadowed by Bluebird's recent announcement to pull the plug on Zynteglo's commercialization in Germany, citing an inability to agree on pricing with regulatory authorities. The company is in discussions with multiple European countries regarding the therapy's pricing, but won't have an update until later this year. Investors were notably upset about the lack of progress and setbacks, and began to abandon the stock en masse.
An amazing cancer drug
Unlike many small-cap biotechs, Bluebird is not a one-trick pony. Together with Bristol Myers Squibb (BMY -0.27%), the company has developed chimeric antigen receptor (CAR) T-cell immunotherapy, Abecma, for relapsed or refractory multiple myeloma.
During clinical trials, 73% of patients treated with Abecma saw at least a 50% decrease in tumor activity. What's more, 33% of patients saw complete elimination of their tumor activity. Keep in mind, patients in the trial had at least three treatment regimens before receiving Abecma, causing these results to really stand out.
The U.S. Food and Drug Administration (FDA) approved the drug back in March. Under its commercialization agreement, Bluebird and Bristol Myers Squibb will share Abecma's U.S. profits equally.
A promising gene therapy candidate
But Bluebird has yet another star candidate. On May 21, the EMA's Committee for Medicinal Products for Human Use gave the green light to the company's gene therapy, Skysona, for the one-time treatment of early cerebral adrenoleukodystrophy (CALD) in patients under the age of 18. CALD is a progressive neurodegenerative disease that affects over 55,000 patients in developed countries.
During clinical trials, 90% of patients studied were free of major functional disabilities after two years, with the most prolonged effect lasting well into year seven. Nowadays, successful gene therapy could have a price tag of hundreds of thousands of dollars for its life-saving benefits, so there's definitely a lot of potential for Skysona.
What's the verdict?
I think Abcema will eventually become a blockbuster drug, while Skysona could potentially bring in billions in one-time revenue if approved. Right now, Bluebird has over $1 billion in cash and investments with no debt, compared to a market cap of $2.1 billion. That leaves the company with an enterprise value of just $1.1 billion and undervalued even without accounting for the potential of LentiGlobin. It's had a tough year, but Bluebird's beaten down price makes this an incredibly intriguing biotech stock to buy now.
