Take Long View

What's happening: Shares of bluebird bio (NASDAQ:BLUE), a clinical-stage biotech with a focus on severe genetic diseases and cancer, are trading lower today after the company reported second quarter results last night.

Why it's happening: Revenue for the quarter was $4.9 million, which was significantly lower than the $11.4 million that analysts were expecting. However, without any approved products on the market, revenue only comes from collaboration revenue and research and licensing fees, and isn't a useful metric to judge the progress of the company. Wall Street appears to be bidding the shares lower today because of the expense side of the income statement. 

Net loss during the quarter rose substantially to $51.9 million, or $1.57 per share, which was much higher than the $0.85 loss that analysts were expecting and up substantially from the $1.5 million loss that was reported in the second quarter last year. The huge jump in expenses came from increased spending on research and development costs, which jumped to $44.3 million during the quarter, up from the $13.9 million that the company spent last year. Management noted that $8.5 million of the increase was related to non-recurring stock-based compensation expense, and a $10.7 million one-time milestone payment was made during the quarter.

Turning to the balance sheet, the company took advantage of its strong stock price and raised $477 million in June through an equity offering at a price of $170 per share, which appears to be well timed by management considering today's share price. Its cash position currently sits at $936 million, which the company believes should be enough capital to fund operations through 2018. 

Bluebird's pipeline continues to advance nicely, and the company has created a regulatory approval pathway with U.S. and EU regulators to bring LentiGlobin BB305 to market. LentiGlobin BB305, which is being studied as a treatment for sickle cell disease and beta-thalassemia major, has shown terrific clinical data and appears to be a multibillion-dollar opportunity for the company.

The company updated investors on the cancer side of the pipeline as well. Two new partnerships were initiated during the quarter with Kite Pharma and Five Prime Therapeutics to develop a portfolio of T cell-based immuno-oncology therapies based on bluebird's immuno-oncology expertise in genome editing. The partnership with Kite Pharma will focus on treatments for human papillomavirus-associated cancers, while the cancer target from the Five Prime remains undisclosed.

Bluebird's collaboration with Celgene took a step back during the quarter, as it is now focused on a single product candidate that is being researched to to treat multiple myeloma. Celgene appears to be placing its CAR-T chips on another developer, as they recently signed a major deal with Juno Therapeutics. 

It's important to remember these various cancer programs are currently in the preclinical stage, and years of clinical work remain ahead for the company, so investors should be prepared for more volatility going forward.

Brian Feroldi has no position in any stocks mentioned. The Motley Fool recommends bluebird bio and Juno Therapeutics. 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.