Looking at the performance of Bluebird Bio (BLUE 1.13%) over the past three years, one wouldn't guess that it is one of the rare gene-editing specialists that has not just one but two approved products on the market in the U.S. The biotech's shares are down by 87% over this period. Is there any hope for Bluebird?
Some think so. From its current share price of $3.42, Wall Street analysts believe the stock could jump by 115% within a year. Their average price target is $7.36. Meeting these expectations is one thing, but performing consistently well after that is another.
Let's find out whether Bluebird's shares are worth buying while they are still down.
All eyes on lovo-cel
Bluebird is currently growing its revenue rapidly. The problem is that its sales are extremely low. In the second quarter, Bluebird's revenue of $6.9 million more than quadrupled compared to the year-ago period. The biotech's two approved gene-editing medicines are Zynteglo and Skysona. The former is a one-time curative treatment for transfusion-dependent beta-thalassemia (TDT), a rare blood disease.
Skysona treats cerebral adrenoleukodystrophy (CALD), a rare, progressive, neurodegenerative disease. Aside from the fact that these therapies are difficult to administer and cost a lot of money, their combined target market in the U.S. is tiny -- about 1,540 patients. That's why Bluebird's next potential product is important. The company is awaiting approval from the U.S. Food and Drug Administration (FDA) for lovo-cel, a potential therapy for sickle cell disease (SCD), another rare blood disorder.
The FDA set a Prescription Drug User Fee Act (PDUFA) action goal date (the latest date by which the FDA should either approve or decline Bluebird's application) of Dec. 20. Bluebird recently got more news from the regulatory agency. The FDA decided that there would not be an advisory committee meeting to discuss the approval of lovo-cel. Why does this matter? The health agency has its own experts who dig through the data from clinical trials and decide whether it is worth approving a medicine.
However, the FDA occasionally requests the opinion of outside independent experts who also review all the facts and data and submit their recommendations. The FDA isn't obligated to follow the opinions of these independent experts, but it almost always does. However, it's important to highlight that the FDA often requests advisory committees "to assist the review division with interpretation when questions or difficulties related to trial data arise."
That's why the FDA's decision not to hold an advisory committee meeting to discuss lovo-cel could be a good sign. There is always the possibility that the data so clearly does not support lovo-cel's efficacy that the FDA need not bother with independent experts singing the same tune, thereby wasting everyone's time. But that's unlikely. Bluebird argues that of all the gene therapies in development to treat SCD, lovo-cel is "the most deeply studied."
The package that supports lovo-cel's approval includes data on more than 50 patients and a follow-up of more than six years for some patients (that's a lot), the longest follow-up time of any gene therapy for SCD.
Lovo-cel's market opportunity
With lovo-cel looking increasingly likely to earn approval, let's turn to the medicine's market opportunity. Bluebird estimates 20,000 eligible patients in the U.S. The company could fairly price lovo-cel at about $2 million, which is even less than what its current therapies cost. Zynteglo is priced at $2.8 million per-treatment course, while Skysona costs $3 million.
Lovo-cel's total addressable market could amount to more than $40 billion for a company with a market cap well below $1 billion. But there's a catch. First, lovo-cel will encounter some of the same issues as Zynteglo and Skysona. It is complex to administer and can only be done in qualified treatment centers. Second, there is another treatment for SCD on the way. Vertex Pharmaceutical and CRISPR Therapeutics are awaiting FDA approval for exa-cel, a competing medicine.
The FDA should decide on this therapy by Dec. 8. Vertex has more funds to work with than Bluebird. On the other hand, lovo-cel received a B+ grade from The Institute for Clinical and Economic Review (ICER), a non-profit organization concerned with ensuring the affordability of medical care. The ICER gave a grade of C++ to exa-cel.
So, at least according to this organization -- the same one that estimated a fair price for these medicines of as much as $2 million -- lovo-cel seems slightly more effective than its would-be competitor. Let's assume Bluebird can capture a 20% share of its target market of about 20,000 patients in the next 10 years. That's $8 billion, or an average of $800 million annually.
Is Bluebird stock a buy?
There is a lot that can still go wrong for Bluebird. But at the very least, the company has proven innovative capabilities. If enough can go right for the company, it could far exceed Wall Street's expectations even through the next year. Bluebird's shares could soar on lovo-cel's approval. But Bluebird remains a very risky stock as investors will be left with worthless shares if anything goes wrong with lovo-cel. So, risk-averse biotech investors would do best to look elsewhere.
