bluebird bio's CHMP Response Lays Groundwork For Its First Gene Therapy Approval

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About: bluebird bio, Inc. (BLUE)
by: Terry Chrisomalis
Summary

bluebird bio's Zynteglo receives positive CHMP opinion for approval of Zynteglo to treat transfusion dependent beta-thalassemia patients.

The European Commission is expected to make its final decision for potential European approval of Zynteglo by Q2 of 2019.

A major risk for bluebird bio will be finding the right pricing strategy if it does receive regulatory approval of Zynteglo.

bluebird bio (BLUE) is one step closer to potentially obtaining European approval for its gene therapy Zynteglo. That's because the Committee for Medicinal Products for Human Use (CHMP) recommended that the gene therapy product should be approved for the European Union. If bluebird gets approval for the gene therapy, that would be a welcomed news for patients. In addition, the biotech is making strides to gain FDA approval in the United States for the very same gene therapy next year.

Positive Regulatory Opinion

The CHMP recommended that Zynteglo should be approved to treat patients with transfusion-dependent beta-thalassemia (TDT). That means the European Medicines Agency (EMA) will decide upon approval of Zynteglo by Q2 of 2019. This will be welcomed news for these patients for several reasons. The first is because it will target those patients who are not able to receive hematopoietic stem cell (HSC) transplantation. The reason why is because they are unable to get a matching donor to make this a safe enough option. The second reason on why these patients will need Zynteglo is because patients might be able to forego constant blood transfusions. These patients are dependent upon having to receive blood transfusions several times per week for life. With gene therapy, they won't have to go through all of this trouble of having to be dependent upon receiving transfusions every week. In my opinion, that will definitely help with patient compliance for this disease. I believe the news of the CHMP positive opinion carries a lot more weight due to the fact that it is the first gene therapy to achieve it in the European Union to treat patients with TDT. That's just one milestone achievement for bluebird bio. The other positive is that it is the first gene therapy submitted for approval by the company itself. This is a major step for the biotech in potentially getting its first approval for a gene therapy product. That is of course if the EMA approves Zynteglo.

Major Risk

I believe that gene therapy companies have a lot of potential to transform the landscape for many diseases. However, there is still one major challenge that most of these types of biotechs have to overcome. Such an issue involves the price of gene therapy treatment. There is a major balance issue when it comes to the cost of gene therapy products. While gene therapies offer a more long-term solution to a disease, that costs the biotech a lot of revenue in the long run. Therefore, to recoup costs, these types of companies charge up to a $1 million or more per treatment. This is to get back development costs for the gene therapy and the amount of revenue lost from developing it as only a "one-off" treatment, as opposed to chronic administration. It is believed that Zynteglo could be sold for $1.2 million in the United States and then $900,000 in the European Union. However, bluebird bio believes that the intrinsic value of the therapy is $2.1 million. Whatever Zynteglo is priced at, it's possible that the biotech may face backlash for its pricing.

Financials

According to the 10-K SEC filing, bluebird bio has cash, cash equivalents and marketable securities of $1.9 billion as of December 31, 2018. A huge chunk of the cash came from a public offering the biotech had done back in July of 2018. The company sold 3,384,616 shares of its common stock at a public offering price of $162.50 per share. This helped to raise about $600.6 million in cash for the biotech. Despite having a lot of cash on hand, a big reason for it was so that it could continue to build out its manufacturing facility in Durham, North Carolina. This was a facility it had purchased to have the manufacturing capability to create vector supply and clinical supply both for clinical trials and then commercialization of any approved gene therapy treatments.

Conclusion

After bluebird bio received a positive CHMP opinion, I believe it has a good shot at obtaining European approval for Zynteglo to adequately treat TDT. The approval would be huge for these patients who must go through many transfusions each and every week for life. This will be a huge game changer for this patient population, who may no longer require constant blood transfusions. There are still two major risks associated with Zynteglo. One of these risks, which was noted above, deals with establishing solid pricing for gene therapies that won't cause a major issue with the market. The second risk, which I believe is the most important hurdle, is obtaining European approval itself for Zynteglo. There is no guarantee that the EMA will agree to approve the gene therapy. I still believe that bluebird bio has a good shot at obtaining approval, because of the safety and efficacy data that was established in multiple clinical studies.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.