The past couple of years have been eventful for Bluebird Bio (BLUE 1.13%). In 2022, the gene-editing specialist earned approval for two therapies in the U.S.: Zynteglo, which treats the beta thalassemia (TDT) genetic blood condition, and Skysona, a treatment for cerebral adrenoleukodystrophy (CALD), an inherited disorder that attacks nerve sheaths in the brain. And last year, Bluebird Bio got the green light for yet another gene-editing treatment, Lyfgenia, which targets sickle cell disease (SCD).
The approval of Lyfgenia was particularly noteworthy because it boasts a target market that is exponentially larger than that of Zynteglo and Skysona combined. Despite this important development, there are severe issues with Bluebird Bio, specifically as it relates to its newest medicine, Lyfgenia. Let's consider two reasons it might not end up being the lifeline Bluebird hopes it will be.
1. Is Lyfgenia a safe treatment?
There aren't many treatment options for SCD, so the approval for Lyfgenia should be welcome. It is a gene-editing therapy that rids patients of the disease after just one treatment course. However, Lyfgenia did not have an easy path to approval. It encountered several safety problems in clinical trials and was even put on clinical hold as a result of suspected adverse reactions.
Now that it is on the market, the U.S. Food and Drug Administration (FDA) has included a boxed warning for hematologic malignancy (blood cancer). This warning likely partly explains why Bluebird's shares dropped after the approval of Lyfgenia. Of course, it isn't a deal breaker for the therapy. The risk of blood cancer associated with it isn't that high; otherwise, it is unlikely that the FDA would have approved it in the first place.
Still, this isn't ideal for Bluebird and its newest gene-editing therapy.
2. Cost could be an issue
Gene-editing treatments aren't known for being cheap. Bluebird's Zynteglo and Skysona cost $2.8 million and $3 million, respectively. Lyfgenia will go for even higher than that at $3.1 million. Now here is why that could be a problem: Lyfgenia isn't the only SCD gene-editing therapy that recently received FDA approval. Working in partnership together, Vertex Pharmaceuticals and CRISPR Therapeutics got the green light for a competing treatment called Casgevy.
However, Casgevy will cost just $2.2 million, and in addition, it does not come with a boxed warning for blood cancer. These factors put Bluebird at a bit of a disadvantage, and that's before considering the fact that Vertex Pharmaceuticals has an excellent track record of negotiating deals with third-party payers. Again, none of this means Lyfgenia won't be successful, but its chances would likely be higher otherwise.
A high-risk, high-reward play
The good news is that Bluebird Bio is making some progress despite these issues. The biotech has already signed two outcome-based reimbursement agreements. The SCD market in the U.S. is vast; Bluebird estimates that there are roughly 20,000 patients eligible for Lyfgenia, compared to a maximum total of 1,540 combined for Zynteglo and Skysona. At a price of $3.1 million, that adds up to an addressable market of $62 billion for Bluebird.
With the challenge from Vertex and CRISPR's Casgevy, Bluebird Bio won't capture this entire market, but it doesn't need to do that to be successful. The company currently sports a market cap of just $264 million. Even seizing a small fraction, say 10%, of its addressable market in the next five years could be a significant win for the company. However, a lot could go wrong for Bluebird.
It could run out of money, safety issues could force it to pull Lyfgenia off the market, or the challenge from Casgevy could prove too formidable. Bluebird Bio's shares have significantly lagged behind the market in the past few years for a reason: The company's stock looks too risky. That hasn't changed, and only those investors comfortable with elevated risk and volatility should consider initiating a small position. For everyone else, there are much better biotech stocks out there.
