An FDA Approval Could Send This Stock Soaring by August

An aging population and unmet clinical needs are driving biotech companies toward advancements in medicine to keep people healthier longer. Bluebird Bio (BLUE -0.16%) is one of those companies, and it's hoping that an existing U.S. Food and Drug Administration (FDA) panel review will yield positive results toward the approval of two new drugs. Not only could an FDA approval provide a boost to patients with unmet medical needs, but it could also give investors some confidence following a devastating four-year stock price decline, going from a high of $153 in 2018 to a current share price just under $4.  

Beti-cel has a good shot at a green light

Independent experts at the FDA are reviewing two of Bluebird's gene therapies for potential approval. The first is beti-cel, which treats people with the beta-thalassemia blood disorder, which results in a lack of oxygen carried throughout the body via red blood cells.

According to the national library of medicine, 1.5% of the total global population -- 80 to 90 million -- are carriers of the disorder. That number continues to expand each year driven by migrating population and inter-ethnic marriage, with upwards of 60,000 carriers born each year.

The good news for Bluebird is that beti-cel received promising feedback from the FDA panel, noting that through 39 months of follow-up with phase-3 study subjects, 89% no longer needed red blood cell transfusions for at least 12 months. These results are giving hope to the company and its investors that the long-awaited approval -- delayed since 2020 over data disagreements -- may be close at hand.

The company could also benefit from having already completed the process of readying the drug for commercialization. Known as Zynteglo in its commercial form, it was granted approval in Europe in 2019. The bad news is the price tag --  an astounding $1.8 million for a one-time treatment. This high cost, and disagreements with payers, resulted in Bluebird bailing out of Europe last year. So even if approved here in the U.S., it might be difficult to get insurance companies to cover such treatment. Be that as it may, the company expects to attract 1,000 to 1,500 patients at an estimated U.S. price tag of $2.1 million per treatment.

The beta-thalassemia market is currently valued at over $400 million, growing at a compound annual growth rate of 7.8% which is expected to continue through to 2028. If Bluebird can achieve FDA approval, followed by local commercial availability, it could reap the rewards of a U.S. market that leads all global regions, making up 39% of the total market.

Fighting one disease with a drug that causes a second disease could spell trouble

Eli-cel is the other Bluebird therapy at the mercy of the FDA panel but might face a bit more of an uphill battle for approval. Eli-cel is developed to treat cerebral adrenoleukodystrophy -- a degenerative disease that affects children by causing damage to the membrane that insulates nerve cells in the brain. If not treated properly it can lead to loss of neurologic function and death.

If Bluebird is successful in its development of eli-cel to meet the requirements of the FDA, it would become the first and only gene therapy approved for the treatment and should put Bluebird squarely on the radar of investors of biotech stocks. However, that is a big "if" for now. The FDA panel reviewing the drug has provided previous feedback displaying concern that the drug led to three of 67 subjects developing Myelodysplastic syndrome (MDS) -- a type of cancer -- where those subjects did not previously exhibit MDS.

Nonetheless, the potential is there for Bluebird to grab a share of a rapidly growing market -- 15.9% CAGR, growing from $291 million in 2020 to over $700 million by 2026 -- driven by an increase in the number of infants who suffer from the disease. And it could likely need that market to stay alive after fourth-quarter and full-year results for 2021 exposed a cash crunch.

The review period by the panel has resulted in a two-day halt of Bluebird's stock, with the possibility of FDA approval as early as June 10. But even if just one of the two therapies is granted approval it could still take months to years to bring commercial availability to the U.S. market. Given that beti-cel was ready for Europe, it may put the company on the shorter end of that timeframe. If approval happens, and Bluebird can work out pricing with payers, this $4 stock could potentially be in double-digits within months.