In early 2022, small-cap biotech Bluebird Bio (BLUE +0.00%) had no products on the market and was facing severe financial troubles. A lot has changed since then for the company. It now has two approved gene-editing therapies commercialized in the U.S. and has started to generate some revenue from them.
But that has done little for Bluebird's stock performance. The company has underperformed the broader market since then. Can Bluebird turn things around? Let's see how things could evolve for the gene-editing specialist in the next 12 months and decide whether its shares are worth buying.
The blueprint of a comeback
In the next year, several developments could positively impact Bluebird's stock. The company should ramp up the number of patients it is treating with its two approved therapies, Zynteglo and Skysona, and earn approval for another gene-editing treatment, lovo-cel. Let's start with Zynteglo and Skysona, which treat transfusion-dependent beta-thalassemia (TDT, a rare blood disease) and cerebral adrenoleukodystrophy (CALD, a rare neurogenerative disorder).
Zyntenglo and Skysona have both been on the market for a little over a year. In that time, Bluebird has started treating just 11 TDT patients -- out of a target market of up to 1,500 -- and just five out of the 40 CALD patients it is aiming to treat. The challenge with these treatments is that, due to their complexity, they need to be administered in qualified treatment centers (QTCs). Bluebird already has 15 QTCs in place to treat TDT patients and is on track to ramp it up to between 40 and 50 by year-end.
With an established network of QTCs, the number of TDT patients treated in the next year should increase substantially, leading to higher and more consistent revenue for Bluebird.
NASDAQ: BLUE
Key Data Points
The most significant opportunity, though, is with lovo-cel, a potential therapy for sickle cell disease (SCD), also a rare blood disease. Lovo-cel is currently being considered for approval by the U.S. Food and Drug Administration (FDA); it could earn the green light by year-end. Let's consider three signs that point to lovo-cel's potential approval.
First, the FDA decided not to convene an advisory committee to discuss the approval of lovo-cel. One of the main reasons the agency typically asks for the opinions of independent experts is that there are difficulties and uncertainties in the data; that's why this is a good sign for Bluebird.
Second, the Institute for Clinical and Economic Review (ICER) -- a nonprofit organization that helps promote fair pricing and affordable medical care -- gave lovo-cel a grade of B+ compared to current standards of care for SCD, indicating that it may provide a substantial net benefit.
Third, as Bluebird argues, it is the most deeply studied potential gene-editing SCD therapy, much more so than any other potential rivals; some patients have been treated for over six years.
What is the market opportunity for lovo-cel? Bluebird estimates a patient population of about 20,000 SCD patients in the U.S. The QTCs already in Bluebird's TDT network will be used for SCD patients. This factor should allow Bluebird to focus on enrolling SCD patients in the next year.
Lovo-cel should also command a high price tag, just like Zynteglo's cost of $2.8 million and Skysona's $3 million. So even grabbing a 20% share of this 20,000 potential market should substantially improve Bluebird's financial results.
Not for risk-averse investors
Despite this potential ahead, the company's market capitalization remains only $324 million. Sure, the company's financial results haven't been great. In the second quarter, it reported revenue of just $6.9 million, an improvement over the $1.5 million recorded in the year-ago period. Bluebird was also unprofitable, with a net loss of $0.67 per share, compared to the net loss of $1.36 reported in the second quarter of last year.
However, for biotech companies of this size, financial results matter less than their late-stage pipelines and the potential of their approved therapies. In other words, the market lacks faith in Bluebird's therapies. On some level, this is understandable. If lovo-cel fails to earn approval for any reason -- even if it is just delayed -- that will be a major blow to the company.
And no matter how likely an approval seems, some unforeseen event could shake things up. And because the downside for Bluebird is so large -- investors could be left with worthless shares if lovo-cel fails -- it makes sense for the market to price that into Bluebird's stock price. Because of that, Bluebird isn't a stock that conservative investors should consider.
However, for those who can stomach the risk, the biotech could deliver excellent returns in the next five years if everything falls the company's way.
