The past three years have been a southbound roller coaster for Bluebird Bio (BLUE -2.72%). The small-cap biotech encountered a series of headwinds, losing 90% of its value. But Bluebird hasn't said its last word -- and it recently earned an important approval in the U.S. that could help it turn things around.

Should investors consider purchasing shares of this beaten-down biotech stock now? Let's look into what Bluebird's recent approval means for the company's overall prospects.

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It's been a long road

On Aug. 17, Bluebird announced that the U.S. Food and Drug Administration (FDA) had granted regulatory approval to Zynteglo, a gene-editing therapy for transfusion-dependent beta-thalassemia (TDT). Bluebird had been working on this medicine for a while. In fact, Zynteglo was approved in Europe back in mid-2019.

The company's work in the U.S. was delayed, though. Among other reasons, the COVID-19 pandemic contributed to lengthening the timeline for Bluebird to complete its application for approval. During the time it took to earn the green light for Zynteglo in the U.S., the biotech decided to exit the European market after failing to strike deals with third-party payers in Europe.

Bluebird also spun off its oncology business into a separate entity to focus on its rare-diseases programs. Lastly, the company warned investors earlier this year that it was running out of funding, although it has since implemented cost-cutting measures to extend its cash runway. With all that going on, Zynteglo's approval is a welcome sight for Bluebird and its shareholders, one that could be the start of a new era for the gene-editing specialist.

But there is still plenty of work ahead

Zynteglo isn't a tablet that patients can take in the comfort of their homes; it's a gene-editing therapy that is complex to administer. Bluebird needs time to properly vet qualified healthcare facilities that can deliver it to patients, this factor will complicate the launch of Zynteglo. And it isn't the only issue: Bluebird set a price of $2.8 million, making it the most expensive therapy in the U.S.

On the one hand, the price makes some sense. Zynteglo is a one-time curative option for patients who would otherwise have to deal with constant blood transfusions, not to mention other burdensome side effects of living with this illness. Bluebird's chief operating officer, Tom Klima, argues that the average cost of blood transfusions for TDT patients over their lifetime is about $6.4 million, even though these procedures don't cure the illness.

From that perspective, Zynteglo arguably provides value to these patients, even with its hefty price tag. The problem is that Bluebird may struggle again to strike deals with third-party payers. To sweeten the deal for insurers, Bluebird will potentially reimburse up to 80% of the cost of Zynteglo if a patient does not achieve transfusion independence.

It will be interesting to see whether Zynteglo can become successful in the U.S. But even following its approval, there's no guarantee that it will.

Proceed with caution

Bluebird is awaiting approval for another gene-editing therapy, eli-cel, a potential treatment for cerebral adrenoleukodystrophy (rare brain condition). In June, a panel of experts convened by the FDA unanimously voted "yes" when asked whether the benefits associated with eli-cel outweigh the risks for the intended patient population.

That's a great sign that the medicine will earn approval; the FDA set a PDUFA action goal date (the date by which it should complete the review) of Sept. 16. Eli-cel may encounter some of the same headwinds as Zynteglo: a highly prohibitive price tag, potential pushback from insurers, and the complexity of administering gene-editing therapies. Combining those factors with Bluebird's financial troubles, the stock remains very risky.

But with a market cap of $455 million, the upside could be enormous if everything goes according to plan. That's a big if, though, and that's why only investors comfortable with above-average risk and heightened volatility should initiate a (small) position in this biotech stock.