bluebird bio, (NASDAQ:BLUE), a gene therapy biotechnology firm, is quickly approaching the end of the 180 day lockup period following its June 18 IPO.
In December, substantial shares held by venture capital firms, directors, and executives will be unlocked and become available for sale, likely causing at least a brief dip in the price of BLUE stock and presenting a potential short opportunity.
Venture Capital Share Unlocking
Some 16.8 million shares BLUE common stock will be unlocked for sale on December 15, a figure that dwarfs the 5.9 million unrestricted shares currently on the market.
Venture capital firms that own large percentages of BLUE remain under significant pressure to return capital to their investors in the post-Great Recession economy, and may sell some of their stakes to raise capital. These firms include Third Rock Ventures, LP, a 20.8% owner of BLUE; TVM V Life Science Ventures GmbH & Co. KG, a 10.6% owner of BLUE; Fidelity Investments, an 8.7% owner of BLUE, ARCH Venture Fund VII, LP, a 7.9% owner of BLUE, and Capital Research and Management Company, a 6.8% owner of BLUE.
Shares held by BLUE's executives and directors will also become unlocked; although they are not under the same type of pressure to raise capital, many of these individuals may decide to sell in the interest of diversification, especially since they have not had the opportunity to do so in six months.
bluebird bio is clinical-stage gene therapy biotech firm seeking therapies for severe genetic and orphan diseases. BLUE's gene therapy platform makes use of a modified HIV-1 virus that has no ability to replicate to deliver functional copies of genes to blood stem cells, which then divide over and over again over the course of the patient's lifetime.
BLUE intends to initially pursue diseases with known, single-gene abnormalities (monogenic diseases), minimizing uncertainties about disease biology. The firm's leading candidate is Lenti-D, which is currently in a Phase 2/3 trial set to last 24 months total; the trial achieved a milestone in late October with the successful infusion of the candidate into a childhood cerebral adrenoleukodystrophy patient. Its next most-advanced candidate, Lentiglobin, is currently in a Phase 1/2 trial.
As a clinical-stage biotech firm, BLUE has yet to generate any significant revenues. As with any clinical-stage firm, there remains a strong risk that BLUE will never successfully gain approval for its candidates, or that it will be unable to commercialize its treatments meaningfully even if they do gain approval. The firm posted huge losses of $15.6 million and $23.7 million in calendar 2011 and 2012, respectively.
The diseases that BLUE intends to initially address have very limited patient populations, which may make commercialization extremely difficult. Under 300,000 patients worldwide are registered as regularly receiving treatment for ß-thalassemia major, while only one in approximately 60,000 new births will suffer childhood cerebral adrenoleukodystrophy. BLUE's treatments require that patients be near a transfusion center, further limiting their patient pool.
Disclosure: I am short BLUE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.