With its shares crushed to a pulp by a 97% decline over the last three years, it's easy to think that Bluebird Bio (BLUE -1.07%) might be on its last legs. But after a shocking rally of nearly 72% on June 13 spurred by a couple rulings from the Food and Drug Administration (FDA), there's reason to believe the biotech could be on the verge of making a comeback.
Now, it's entirely possible that Bluebird will eclipse its former glory by commercializing more than one medicine before the end of the year. But there are still a few obstacles it'll need to navigate successfully before it becomes an investor favorite, so let's take a look at what's happening and why it's likely to determine the company's future.
Better days are likely ahead
Bluebird develops gene therapies that have the potential to treat rare hereditary diseases like beta thalassemia and cerebral adrenoleukodystrophy (CALD). And on June 10, it reported that the FDA's nonbinding advisory committee had weighed in unanimously positively on not just one but two of its pending regulatory submissions. The submissions pertained to its beti-cel and eli-cel therapies, which are intended to treat beta thalassemia and CALD in adolescents, respectively.
Though the committee's votes aren't the final barrier to clear before the drugs can be put up for sale -- that distinction goes to the binding committee, which is slated to meet late summer -- they do mean that Bluebird is significantly closer to generating formidable revenue once again. For reference, right now it only makes trailing 12-month revenue of just over $4.7 million, a far cry from its sum of more than $250.7 million in 2020.
In terms of the scale of the revenue Bluebird could realize in 2023 if the binding committee's ruling goes in its favor, the average estimate of 12 analysts clocks in at around $50.1 million. For its beta thalassemia therapy specifically, analyst Mani Foroohar from SVB Securities holds that the biotech could make as much as $64 million per year at its apex. That means that drug alone could eventually put its total inflows at near its former peak revenue, if only for a year or so.
It isn't out of the woods just yet
As positive as the advisory committee's votes were, it's important for investors to recognize that Bluebird is still in a very diminished state compared to a couple of years ago. In 2021, four of its clinical trials investigating its therapies for sickle cell disease and beta thalassemia were put on hold by regulators as a result of safety concerns, though all were ultimately resumed. And its oncology programs were spun off into a separate company, 2seventy Bio, leaving its pipeline much slimmer and populated with only a small handful of therapies for severe genetic diseases. So its long-term growth potential still isn't the same as the pre-spinoff Bluebird's.
In July, it announced that its attempts to enter the European Union market with its regulator-approved CALD therapy had ended in failure, and it retreated from the continent, marking a major setback. Then, in April 2022, it announced layoffs for 30% of its workforce in a bid to save as much as $160 million in labor costs spread over the next two years -- a terrible sign for its ability to advance its preclinical pipeline and its platform.
That should cut its cash burn rate to around $340 million for 2022 -- but right now, it has only around $212 million in fully liquid assets, and last year's total operating expenditures topped $529 million. So it might need to take out some new debt or issue new shares to make up for the difference between its target expenditure level and what money it has on hand.
In other words, Bluebird hasn't quite signed that new lease on life yet, even if it looks very likely to happen. Tune in again later in the summer, when the binding committee votes on its medicines. Getting the go-ahead for even one would mean that investors could stop sweating about the biotech's survival.
