Being a highly innovative company isn't a sufficient condition for success in the biotech industry. Bluebird Bio (BLUE 0.87%), a small-cap gene-editing specialist, is a good example of this. Though the company has developed groundbreaking therapies, the stock has significantly lagged the market in recent years. Still, if Bluebird Bio can turn things around, the company could deliver explosive returns to investors who initiate a position today. Is Bluebird Bio worth the risk?
The challenge of gene editing
Bluebird Bio has three approved gene-editing therapies: Zynteglo, Skysona, and Lyfgenia. The most important of this trio, and the latest to earn approval (it did so in December), is Lyfgenia, which treats a rare blood disorder called sickle-cell disease (SCD).
What makes it the most important? The number of potential patients. Zynteglo, which targets another rare blood disease called transfusion-dependent beta-thalassemia (TDT), can target a maximum of 1,500 patients in the U.S. Skysona -- a therapy for a rare, progressive neurogenerative disease called cerebral adrenoleukodystrophy -- has a minuscule target market of just 40 patients. Meanwhile, Lyfgenia is looking at 20,000 potential takers.
Still, ex-vivo gene-editing therapies are complex to administer. They require collecting the patient's cells, editing them, and reinserting them without the genetic defect that caused the disease. These can only be administered in qualified treatment centers (QTCs). Bluebird Bio has been ramping them up since Zynteglo's approval in 2022. As of the end of the first quarter, the biotech had activated 64 QTCs for Zynteglo and Lyfgenia and another six for Skysona.
Bluebird Bio has started 15 cell collections, but only one for Lyfgenia. The company expects between 85 and 105 patient starts across its three approved therapies by the end of the year.
What does the future hold?
What does all this mean for investors? This ride will require lots of patience because it might be a while before Bluebird Bio can turn things around. Here are two reasons why.
First, sales will be slow to ramp up. In the first quarter, Bluebird Bio's net revenue increased substantially, all the way from $2.4 million to a much more impressive -- though still pretty meager -- $18.6 million.
As of March 31, the biotech's cash balance was $264 million. Bluebird Bio recently resorted to a round of debt financing; it has the option of raising an additional $50 million. Management thinks the cash it has on hand in addition to the $50 million in debt it plans to opt in for could allow the company to sustain itself until the first quarter of 2026. That's slightly less than two years.
Second, although Bluebird Bio's financial situation could improve as Lyfgenia starts making an impact, there's another problem: It has a serious competitor. Casgevy, another gene-editing treatment for SCD and TDT, earned approval recently. The team of Vertex Pharmaceuticals and CRISPR Therapeutics developed it. Casgevy costs $2.2 million in the U.S., while Zynteglo and Lyfgenia are priced at $2.8 million and $3.1 million, respectively.
Furthermore, Lyfgenia comes with a warning of a higher risk of blood cancer. Casgevy doesn't. Even though Lyfgenia and Casgevy are the only two curative treatments available for SCD, it's not clear that the former could grab a decent portion of the market to make the stock attractive before other competitors make it this far (there are several SCD and TDT therapies in development).
The bottom line: Bluebird Bio's future looks uncertain, and likely bleak. The best-case scenario might be that the biotech gets acquired. Bluebird Bio has a lot to offer: three groundbreaking therapies and the team of researchers that developed them. So far, though, there has been no noise around a potential acquisition. Investors shouldn't buy the stock expecting shares to soar if this outcome occurs. And considering how risky Bluebird Bio looks, investors -- aside from maybe the most aggressive -- should probably stay away from the company altogether. There are much more attractive biotech stocks on the market to consider.
