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What's in bluebird bio's Pipeline That Has Investors So Excited?

By Brian Feroldi – Jul 19, 2015 at 10:02AM

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Bluebird bio has been a red-hot stock since its IPO in 2013. What's in its pipeline to justify the strong stock movement?

Clinical-stage biotechnology company bluebird bio (BLUE -6.58%) has been a stellar investment for early investors, with the stock up more than 500% since coming public in 2013. However, since bluebird has yet to bring a product to market, investors have been bidding up the stock based solely on the clinical results from its pipeline.

So, what's in bluebird's pipeline that has investors hitting buy?  

BLUE Chart
Gene therapy as a cure
Bluebird bio is a gene therapy company attempting to develop potential cures for a handful of rare diseases. Gene therapy involves extracting a patient's own cells, inserting a healthy gene directly into them, and then reintroducing them back into the patient's body. When performed successfully, this technique changes the genome of the patient at the cellular level, which directly addresses the root cause of a genetic disease. With a healthy genome in place, the body can then produce healthy proteins on its own, which can actually lead to a cure of a genetic disorder. 

This treatment holds a lot of promise, and bluebird bio is currently researching this therapy on a handful of disease states.

Source: bluebird bio.

The potential of LentiGlobin
While bluebird bio is developing a number of product candidates, the most exciting one to investors appears to be LentiGlobin. This treatment may hold a cure for not one but two rare diseases: Beta-thalassemia major and Severe Sickle Cell Disease.

Beta-thalassemia is an inherited blood disorder that causes severe anemia, which is when there are not enough healthy red blood cells in the body. In the U.S. and Europe, about 15,000 patients currently have the disease, and about 1,500 new patients are diagnosed each year. The majority of these cases are considered severe and can lead to yellowing of the skin and eyes, the inability to gain weight, and a failure to thrive. The disease can be fatal if left untreated. 

Current treatment of Beta-thalassemia involves a lifelong series of blood transfusions as well as taking medications that can have negative side effects. The disease can be cured by performing a complete bone marrow transplant, but this procedure is extremely risky and requires sibling donors with a matching blood type. Less than 25% of Beta-thalassemia patients even have this as an option. 

Clinical data release by bluebird bio has shown that patients who used LentiGlobin as a treatment for Beta-thalassemia no longer need to get additional blood transfusions and have not experienced any adverse events related to the therapy. This suggests LentiGlobin appears to be a cure for Beta-thalassemia, and patients, providers, and investors have every reason to be excited about the potential for this therapy.

Source: bluebird bio.

LentiGlobin and Severe Sickle Cell Disease
While the potential for LentiGlobin and Beta-thalassemia is certainly exciting, LentiGlobin may also be a cure for a disease state that afflicts far more patients: Severe Sickle Cell Disease.

Severe Sickle Cell Disease is also an inherited blood disorder, classified by red blood cells taking on a sickle-like shape, which also leads to chronic anemia. The disease is far more common than Beta-thalassemia, with prevalence estimates for the U.S. and Europe around 150,000 patients, with another 3,000 patients born with the disease each year. 

Current treatment options include taking a drug called hydroxyurea, which helps to prevent sickle-shaped red blood cells from forming, but it does not eliminate them. Hydroxyurea has toxicity issues that make it challenging for patients to get the high dosage needed for optimal health outcomes. 

When LentiGlobin was recently used as a treatment for a patient with Severe Sickle Cell Disease, the patient showed no hospitalizations related to sickle cell disease complications and is being weaned off transfusions. While these results are only from one patient, they certainly hold a lot of promise for the potential of the therapy. 

Strong revenue potential ahead
Curing these disease states would be a wonderful outcome for patients, and if LentiGlobin can continue to show strong clinical outcomes, it could be a blockbuster for investors as well. Peak sales estimates for LentiGlobin are currently pegged around $4 billion, so the therapy holds huge potential if bluebird bio can successfully navigate the regulatory approval process.

Meanwhile, although Lenti-D and LentiGlobin are the furthest drugs along in development and get all the attention, bluebird bio has also lists development partnerships with Celgene and Kite Pharma to explore opportunities in the oncology space. While working with a prominent player like Celgene certainly sounds promising, the partnership appears to have hit a major snag after Celgene decided to discontinue their research efforts on CAR-T therapies with bluebird bio. Bluebird bio's partnership with Kite appears to be on track, but as the product candidate is still in the preclinical stage, it will still be quite some time before investors should get too excited about this opportunity.

The potential for bluebird bio to be a great investment is certainly there, but with a market cap already north of $5 billion, investors appear to have already priced in quite a lot of good news. Ultimately, I think it's too early to get overly interested in the stock. There is simply too much risk for my taste, but for investors with a strong stomach and a long-term time horizon, bluebird bio could still hold multi-bagger potential if LentiGlobin proves to be the cure we all hope it is.

Brian Feroldi has no position in any stocks mentioned. The Motley Fool recommends bluebird bio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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