What does a gene therapy biotech like Bluebird Bio (BLUE 1.13%) have to do with a cryptocurrency like Shiba Inu (SHIB -3.40%), one of the hottest meme coins of yesteryear? If you said "they're both risky investments," you're correct.
Most well-diversified portfolios should have an allocation to high-risk, high-reward investments, because finding even one that delivers a disproportionately large gain can be enormously beneficial. But which of these two risky investments is the better play? Let's examine Bluebird first.
Bluebird is having some problems
At a glance, it looks like Bluebird Bio and its shareholders should be sitting pretty. It has three gene therapies on the market, all of which were approved in the past year and a half. Its drug Lyfgenia, a near-curative medicine for sickle cell disease (SCD), was just approved for sale on Dec. 8.
All three products will be ramping up their revenue for at least the next couple of years. On average, Wall Street analysts anticipate that in 2024, sales of its therapies will bring in about $132 million, a 214% increase from estimated revenue of $42 million in 2023. Under normal conditions, it would be reasonable to expect Bluebird's share price to rise in the coming years.
Unfortunately, that's where the positive news ends. Presently, its pipeline has only two programs, both of which are intended to treat SCD. The SCD market is unlikely to grow much, as both Bluebird and its direct competitor CRISPR Therapeutics are commercializing their curative medicines, and management estimates that there are only 20,000 patients eligible for treatment in the U.S.
Therefore, its two pipeline candidates, assuming they eventually get approved for sale, will have a hard time gaining market share, and it will be years and years before any new programs for other indications have a chance at generating revenue if they get approved. In other words, this company has a poor long-term growth outlook.
It also doesn't have much in the way of spare resources to change that. It's unprofitable and it's carrying $304 million in debt. At the end of Q3, it had $227 million in restricted cash, cash, equivalents, marketable securities, and short-term investments. Management claimed that this would last into Q2 of 2024 -- a very short runway.
So on Dec. 19, Bluebird priced a public offering worth $125 million. But given its need to set up new qualified treatment centers to administer its gene therapies, and its trailing-12-month cash burn of $301 million, even the latest cash infusion will not guarantee its near-term survival. So this stock sure looks like quite a risky investment, especially considering that any near-term upside from top-line growth might come at the cost of burning even more of its cash.
Can Shiba Inu recover?
Shiba Inu's appeal to investors is considerably simpler than Bluebird's. It's a meme coin that's ripe for speculation owing to its devoted community of holders and its lovable mascot, a Shiba Inu dog. Buying it is similar to buying a lottery ticket in that the chances of it gaining in value and retaining that value over time are minimal and largely unpredictable.
But under the right set of conditions -- another speculative cryptocurrency frenzy wrought by falling interest rates and loose conditions for financial borrowing, like in 2021 -- it could, as its enthusiastic holders say, go to the moon. You can think of a cryptocurrency "mooning" as a token's price increasing by many times as a result of persistent and intense speculative.
In terms of its fundamentals, Shiba Inu has a market cap of about $6.2 billion, making it the 17th-largest cryptocurrency by that metric. It's the native currency for the ShibaSwap decentralized exchange, not to mention the ShibaSwap non-fungible token platform, and the Shibarium, which is its associated blockchain. While all three of those platforms were initially conceived to be major catalysts for the coin, since the last boom time there's been nothing but losses for holders.
Essentially, buying Shiba Inu coin is buying a dream that has little chance of becoming a reality.
Narratives and timing matter here
So what's the better investment? Believe it or not, between these two, it's Shiba Inu, at least for now.
It's easy to imagine another speculative frenzy driven by low interest rates and hot memes happening. There is a small but real chance that such a frenzy would lead to huge returns for people who buy the cryptocurrency now.
On the other hand, Bluebird's long-term future looks bleak, and it has no chance of getting bailed out from its doldrums by macroeconomic factors, nor will its looming financial problems get better soon. It probably will continue to limp along for a time. And so will Shiba Inu, at least until the next crypto bull market happens, assuming one does.
But if you like your investments to retain their value, don't buy either of these because they're simply too risky to touch. There are better risk plays out there in both biotech and cryptocurrency.
