What do CRISPR Therapeutics (CRSP 0.97%), Bluebird Bio (BLUE +0.00%), Editas Medicine (EDIT +1.73%), and Intellia Therapeutics (NTLA 2.46%) all have in common? If you said, "They're biotechs developing gene therapies," you're right. And because of that, they share one big risk that investors need to know about: manufacturing.
Most of the time, investors in biopharma businesses don't need to worry about manufacturing, because companies can price their medicines according to the costs they anticipate. But for the types of gene therapies that are hitting the market now and in the near future, it isn't that simple. Here's why.
NASDAQ: BLUE
Key Data Points
Certain gene therapies are incredibly hard to make profitably
Let's look at Bluebird's manufacturing process as an example, with the understanding that the other gene therapy stocks mentioned above face largely the same set of issues because they need to make their gene therapies in more or less the same way.
Bluebird's gene therapy Zynteglo, which treats beta thalassemia, isn't something that it can simply whip up in a large volume at a central manufacturing site and then distribute to patients across the world. The reason is that Zynteglo and the company's other therapies use the patient's cells as the starting material.
Therefore, patients need to donate their cells at a qualified treatment center (QTC), which then ships them to a manufacturing site, where the cells are genetically engineered to become the therapy.
So the economies of scale that are usually present in pharmaceutical manufacturing are simply not in play. There can't be any co-mingling of one patient's cells or therapy product with others; that would risk the patient's body rejecting the foreign material, so every single dose needs to be made at a small scale.
Speaking from my experience designing the manufacturing protocols for such gene therapies, it's a labor-intensive process. There are many potential points of catastrophic failure that require starting from scratch with a new sample from the patient, and few opportunities for automation of any kind.
Furthermore, because of how complex the process is, companies typically struggle to onboard contract manufacturers, which makes scaling up their output even harder. Ultimately, that could make it difficult or unprofitable to serve demand -- and that would sink or severely hamper the developers.
Assuming everything goes according to plan after it's manufactured, the therapy gets shipped back to the patient's local QTC, where it's infused back into them, hopefully treating their illness. In total, the process can take up to 90 days.
Based on Bluebird's price point of $2.8 million, the manufacturing costs per dose are incredibly high, and they might not fall much with time. The company had to withdraw Zynteglo from the European Union (E.U.) market in 2021, because it couldn't get insurers to cover the treatment. It might now face the same problems in the U.S.
NASDAQ: CRSP
Key Data Points
Don't expect catastrophe
Bluebird's peers like CRISPR Therapeutics, which could soon commercialize its own gene therapy for sickle cell disease (SCD) and beta thalassemia, might face precisely the same stumbling blocks. Ditto for Editas, whose programs for those two illnesses are in an earlier stage.
And while Intellia isn't targeting the same conditions, it will still need to figure out how to make its manufacturing efficient enough to be profitable, which none of its competitors have done yet.
But will the tortured gene-therapy manufacturing process doom all four companies? Probably not. While it's still a major risk for investors because stocks tend to struggle when thorny issues get in the way of realizing growth or profits, there's no guarantee that CRISPR or the others will have as many problems as Bluebird did. Nor is Bluebird destined to fail.
And for all of these companies, the type of gene therapies that require the finicky and complicated manufacturing are only part of what's cooking in their pipelines. Many of their other therapeutic modalities aren't as burdensome to make and administer.
Plus, pretty much everyone in the field would prefer to simplify the process by developing future candidates that are "off the shelf," meaning that they won't require using a patient's cells.
NASDAQ: EDIT
Key Data Points
For now, assuming you're considering an investment in any of these businesses, keep an eye out for any mention of challenges with their therapy output, especially if it involves contract manufacturing sites, which may be where the majority of doses are made in some cases. The longer such problems drag on, the more likely they are to crimp earnings, leaving shareholders exposed to the downside.
In contrast, the competitors that manage to make their sales of gene therapies profitable the soonest after launch are likely to be better bets, since they are less likely to need to sort out hard efficiency problems down the line.
