With the stock down 52% in the last three months, Bluebird Bio (BLUE 1.78%) shareholders are bound to be feeling pretty antsy. Between the company's weak cash position, missed deadline for a drug candidate submission to regulators, and 30% cut in its workforce a year ago, there hasn't been much to celebrate lately.
Still, the future could be a lot brighter, especially if Bluebird Bio manages to commercialize its gene therapy for sickle cell disease and if its freshly commercialized therapies, Zynteglo and Skysona, can gain some traction. Let's weigh the evidence -- both in favor and against -- for buying the shares now.
Why things could start looking up
A few factors could buoy Bluebird despite its recent stumbles. First, while it did miss its goal of submitting its approval packet for a therapy called lovo-cel to the Food and Drug Administration (FDA) in the first quarter, it says that once the FDA gets back to it in a few weeks, it'll do so. After that, if everything goes well, Bluebird will aim for a launch of the sickle cell disease therapy in early 2024.
When paired with its two recently launched gene therapies, Zynteglo for beta thalassemia and Skysona for cerebral adrenoleukodystrophy (CALD), Wall Street analysts predict, on average, that the company could bring in some $80 million in 2023 and $171 million in 2024 if lovo-cel is approved. That's a big step up from 2022's grand total of $3.6 million in revenue.
Also, management claims that cash holdings of $227 million at the end of Q4 2022 will be enough to fund operations through Q4 2024, so the company might not need to raise more capital anytime soon. Bluebird last did a stock offering in January to raise $120 million in cash, but if things go according to plan, shareholders won't need to worry about their shares being diluted any further.
This is still an uber-risky purchase
There are a few problems with buying the dip right now, even considering the above.
At the moment, Bluebird has $45 million in restricted cash. Management plans to use that money to cover expenses between now and the end of 2024. But the biotech's 2022 annual report explicitly states that "there is no assurance as to when or if our restricted cash will become available."
But there's another major issue. Let's assume that Bluebird gets lovo-cel approved and commercializes it in 2024 and that the analysts are right about how much money it'll make in the process. There's no guarantee that Bluebird will remain profitable, even with Skysona and Zynteglo on the market. In fact, the company was forced to exit the E.U. market in mid-2021 with both Skysona and Zynteglo because governments there balked at the high costs of treatment, and the company couldn't turn a profit in the region.
While it's possible that insurance companies in the U.S. will be more willing to work with Bluebird to make its therapies accessible, if the price tag for a course of treatment is in the ballpark of $1.8 million, like it was for Zynteglo in Germany, it could still be a very tough sell.
In short, Bluebird faces a rocky path over the next couple of years, and its past performance gives investors little in the way of encouragement. Of course, it's entirely possible that the business learned key lessons from its venture into the E.U. market that will help it to avoid a similar fate in the U.S. But unless you have a high tolerance for risk, it's probably better to avoid buying the dip, because you could be on the losing end if the company's plans don't play out more or less perfectly.
