bluebird bio: Beaten Down Biotech With Possible Long-Term Potential

May 09, 2022 1:59 PM ETbluebird bio, Inc. (BLUE)BMRN13 Comments4 Likes

Summary

  • Potential to receive FDA approval of beti-cel for beta-thalassemia and eli-cel for cerebral adrenoleukoodystrophy in 2022.
  • FDA approvals of beti-cel and eli-cel would give bluebird bio the ability to receive Priority Review Vouchers which it could sell for upwards of over $100 million each.
  • A 3rd FDA approved gene therapy by the name of lovo-cel for SCD is possible as a BLA filing for this program is expected in Q1 of 2023.
  • The global sickle-cell disease treatment market is expected to reach 7.71 billion by 2027.
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Scientist taking a sample out of a petri dish using a pipette

DNY59/E+ via Getty Images

bluebird bio, Inc. (NASDAQ:BLUE) has great potential for the long-term if it can obtain 3 FDA approvals for its gene therapies in the coming years. It has been beaten down to a series of bad events over the last few years. However, there is potential to invest in this name in a speculative fashion.

There are several reasons why I believe this to be the case. The first reason is that it only trades at around $3.60 per share, which means the downside is limited. More importantly, there is potential for an explosive recovery. It still is a speculative situation, but it expects up to 2 possible FDA approvals for its gene therapies in 2022.

Then, there is the possibility of a 3rd FDA approved gene therapy candidate from its pipeline in 2023 as well. The 3 gene therapies in question are beti-cel for beta-thalassemia, eli-cel for cerebral adrenoleukoodystrophy and lovo-cel for sickle cell disease. The possible BLA filing for lovo-cel for sickle-cell disease is expected Q1 of 2023, from there FDA approval would come later in 2023 or early 2024. The FDA has set PDUFA dates of August 19, 2022 for beti-cel for beta thalassemia and then September 16, 2022 of eli-cel for cerebral adrenoleukodystrophy. But before these PDUFA dates, the FDA will have advisory committee meetings to review the drug consecutively June 9 and 10 of 2022.

Even though the stock price is low right now, there is potential for the stock to trade higher on the 3 possible FDA approvals expected. Of course, it is risky bet, but as a speculative name at $3.60 per share, it may be worth a shot.

Lovo-Cel For The Treatment Of Patients With Sickle Cell Disease

The first program to go over involves the use of lovo-cel for the treatment of patients with sickle-cell disease (SCD). That's because there is an opportunity to do well in 2023 if the company can deliver on two milestones with respect to this program.

Sickle-Cell disease (SCD) occurs when red blood cells become misshapen or start to break down in a way. The red blood cells bend into a sickle-shape, thus the name SCD. That's the thing though, it's not just that these cells die off early. It leaves the patient without the proper amount of red blood cells needed to receive the proper oxygen for the body.

There is also another problem that arises, known as vaso-occlusive crisis (VOC). VOC means that the blood flow through the body becomes blocked because of the sickle shapes, thus, in turn it causes these patients pain. Some symptoms these SCD patients experience are:

  • Pain (vaso-occlusive crisis)
  • Infections
  • Fatigue

Not that many drugs are out there to treat it and even some that are approved, are used to go after VOC primarily. The global sickle-cell disease treatment market is expected to reach 7.71 billion by 2027. Only a few patients are able to get a bone-marrow transplant. Most have to go through taking a lot of medications and blood transfusions. bluebird bio has done well with several studies of lovo-cel for the treatment of patients with SCD. It has treated nearly 50 SCD patients with this gene therapy and testing has shown thus far that it helps these patients. It has met the necessary endpoints for FDA approval and has shown to help SCD patients with respect to VOC.

The two catalysts expected for this program are the possible BLA filing for lovo-cel for SCD planned in Q1 of 2023 and then following that possible FDA approval in late 2023/early 2024. However, there are three risks that you should be aware of. The first risk is that there is a partial clinical hold in place for patients under the age of 18 with SCD.

Hopefully, this partial clinical hold can be resolved so that bluebird bio can treat these younger patients again. However, I think this program is still okay because the hold doesn't pertain to patients who are over the age of 18. All these patients are still being treated with lovo-cel. The partial hold may or may not be resolved, but it pertains to one patient who developed persistent anemia a year and half following treatment with lovo-cel.

Some analysts believe this could have been the result of blood cancer or other disruption occurring with respect to stem cells. In any case, the FDA review will ultimately yield what happened. In the meantime, the fact that bluebird bio could continue dosing everyone above the age of 18 with lovo-cel is a huge positive. A second thing that bluebird bio needs to make sure is correct before a possible BLA filing is its manufacturing process. To obtain regulatory approval for lovo-cel, it will have to show that its manufacturing process ends up being similar to that which was achieved during ongoing clinical trials.

The studies ongoing now in patients 18 and older with SCD are HGB-206, HGB-210 and LTF-307. All patients in the HGB-206 study in Group have been treated. If the data is positive, this is the main study which will form the primary basis of efficacy for FDA approval. If all goes well for bluebird bio it expects a BLA filing by Q1 of 2023.

Additional FDA Approvals Possible From Gene Therapy Pipeline

It remains to be seen whether or not the partial clinical hold for lovo-cel for SCD gets lifted. However, there are two other possible FDA approvals expected later this year in 2022. These involve the PDUFA dates of August 19, 2022, for beti-cel for beta thalassemia and then September 16, 2022, of eli-cel for cerebral adrenoleukodystrophy.

As I noted in the beginning above, there are going to be two FDA advisory committees expected to happen first consecutively June 9 and 10 of 2022. I view these advisory committees as a good thing. That's because advisory committees give companies and investors a better idea of whether or not a drug will be approved by the FDA.

Of course, the FDA doesn't have to listen to its advisory committee, but it does hold a huge weight over whether or not a drug is approved. If the two advisory committees turn out to be good votes, then I expect FDA approval to be possible for beti-cel and eli-cel later in 2022.

Financials

According to the 10-K SEC Filing, bluebird bio had restricted cash, cash and cash equivalents, and marketable securities of $442 million as of December 31, 2021. It believes it has enough cash to fund its operations through first half of 2023. It is looking for ways to raise cash with many financial measures like selling stock or other means.

However, what may also be possible is the ability to obtain two Priority Review Vouchers. If the company can obtain FDA approval for either/both beti-cel for beta-thalassemia and eli-cel for cerebral adrenoleukodystrophy, then it can get such Priority Review Vouchers.

Why are these so important for it to possibly get? That's because these are allowed to be sold if the company doesn't want to hold onto them. They can be used to speed up the approval process to 6 months, instead of standard review time of 12 months. They go for a huge amount, around $100 million, but can be even higher if a company wants it bad enough. For example, BioMarin (BMRN) sold its Priority Review Voucher for $110 million. This is a possible way to raise cash, of course, that depends upon whether or not it receives FDA approvals for beti-cel or eli-cel.

A major reason for extending cash runway is because the company ended up cutting 30% of its workforce. By doing this, it expects to save up to $160 million in cost saving measures over the next 2 years. That's why it has been able to extend its cash runway through the first half of 2023. Hopefully, the FDA approvals are achieved so that it can obtain Priority Review Vouchers to sell.

Risks To Business

The biggest risk for this biotech would be the two upcoming FDA advisory committee meetings in June of 2022 and then subsequent PDUFA dates in 2022 as well. There is no guarantee that the FDA advisory committees will vote favorably for the gene therapies in question. In addition, there is no guarantee that bluebird bio will receive approval for any of its gene therapies. The good news is that bluebird has 3 possible shots on goal for FDA approvals of its gene therapies.

Another risk which may hinder the possible FDA approval of lovo-cel for the treatment of patients with SCD is the partial clinical hold which still remains in place. The good news here is that bluebird has still been able to treat patients who are the age 18 and older.

Another risk might be the need to raise cash. While I'm hopeful that the company can wait to raise cash in the first half of 2023, the stock market environment is very shaky right now and in bearish territory. This means it may choose to raise cash earlier than expected. The final risk is due to the weak environment. The stock may trade lower because of the weak market and may even reach below $1 per share. If this happens and the stock doesn't recover, then after several possible extensions, it may need to enact a reverse split. It is not there yet, but several FDA rejections are likely a huge risk of this happening.

Conclusion

bluebird bio is a great long-term name if it can get the 3 FDA approvals is trying for. Of course, it is very risky at the moment, because such regulatory approvals from the FDA are a toss-up. The FDA advisory committees coming up in June 9 and 10 of 2022 should shed some light on whether or not the biotech has a good shot at receiving approval from the FDA.

Another good aspect to consider is that ability to possibly get 2 Priority Review Vouchers, if it receives FDA approvals for beti-cel and eli-cel. It can choose to keep them or sell them. I showed you how powerful these Priority Review Vouchers can be, where Biomarin obtained $110 million from one of them. I believe it offers a great trade opportunity now, especially trading at only 3.60 per share.

This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to, I'm currently offering a two-week free trial period for subscribers to take advantage of. My service offers a deep-dive analysis of many pharmaceutical companies. The Biotech Analysis Central SA marketplace is $49 per month, but for those who sign up for the yearly plan will be able to take advantage of a 33.50% discount price of $399 per year.

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