Two weeks ago,
bluebird bio
secured Food and Drug Administration approval for its gene therapy for sickle cell disease, a significant milestone for the roughly 100,000 people in the U.S. who suffer from the condition.
The approval, however, has ushered in disaster for bluebird shareholders. The stock closed at $4.81 the day before the Dec. eight approval, and has since tumbled about 50% to $2.43 through Tuesday’s close of trading. The stock dived another 44.5% Wednesday to $1.35 per share, after setting a record low of $1.26 per share.
The Massachusetts-based biotech lateTuesday said it would sell just over 83,000,000 shares of its stock at $1.50 per share, in an effort to raise $125 million—triggering Wednesday’s selloff. The Massachusetts-based biotech had announced its public offering plans late Monday, though not the pricing.
“We see this as the necessary action to alleviate near-term balance sheet pressure,” Leerink partners analyst Mani Foroohar wrote late Monday.
The stock’s decline is in contrast to the
SPDR S&P Biotech ETF,
which has shot up 28% since the start of November. Expectations for lower interest rates, plus a wave of acquisitions, has injected new optimism into a sector that has struggled through three straight down years.
Bluebird’s plummeting share price is a potent symbol of the structural problems still facing small and midsize biotechs: Many are struggling with dwindling cash balances as cash has become harder to raise over the past three years. Meanwhile, commercializing complex, cutting-edge gene therapies like bluebird’s comes with its own set of particular challenges.
Bluebird remains something of a cautionary tale for investors looking to jump back into the sector in 2024.
The company’s cash problems stretch back years. While bluebird has three approved medicines, all are extremely complex gene therapies with multimillion-dollar price tags. As of the third quarter, only 22 patients had begun taking the company’s drugs; sales were just $3.6 million in 2022, and analysts expect sales of $41.6 million this year.
In November, the company said it had ended the third quarter with $227 million in cash, which it said would be enough to meet its operating expenses and capital expenditure requirements only into the second quarter of 2024.
The company, however, was banking on the FDA to grant it a priority review voucher along with its sickle cell gene therapy approval; bluebird had planned to sell the voucher to
Novartis
for $103 million. Such vouchers, which can be sold, can be used to speed up FDA review of another medicine. They are awarded when drugmakers get FDA approval for medicines to treat rare pediatric diseases, among other conditions.
The problem: Bluebird ultimately didn’t receive a priority review voucher when the sickle cell gene therapy, called Lyfgenia, was approved. The FDA said Lyfgenia was too similar to another bluebird gene therapy, Zynteglo, for which the company had already received a priority review voucher. In December 2022 and January 2023, bluebird sold two priority review vouchers, including the Zynteglo voucher, for $102 million and $95 million, respectively.
Without the priority review voucher to sell, bluebird needed to come up with cash fast. Its solution was the stock offering, which will dilute existing shareholders. The company said it would use the cash from the offering to support commercialization and manufacturing of its three approved products: Lyfgenia, Zynteglo, and another gene therapy called Skysona.
On an investor call on Dec. 8, the company said it would discuss the denial of the priority review voucher with the FDA.
“We currently have a cash runway into Q2 of next year and, of course, we are always exploring additional financing opportunities,” bluebird CEO Andrew Obenshain said on the call.
The company didn’t immediately respond to a request for comment Wednesday.
Foroohar, in his Monday note, wrote bluebird had little choice but to issue the public offering. He wasn’t optimistic, however, about the company’s future.
“Though this offering will bridge BLUE to additional revenue from Lyfgenia, the pathway to cash flow break-even is still murky in absence of truly remarkable launch acceleration,” he said.
When the FDA approved Lyfgenia, it attached a warning on the drug’s label, saying some patients who had received the treatment had developed blood cancer. The label for the other sickle cell gene therapy approved the same day—
Vertex Pharmaceuticals
’ Casgevy—carried no such label.
What’s more, bluebird set a list price of $3.1 million for Lyfgenia, nearly a million dollars more than the $2.2 million list price that Vertex set for Casgevy.
Both the safety warning and the higher price seem likely to put bluebird at a significant disadvantage in the commercial battle between the two companies. Foroohar wrote that the warning on Lyfgenia’s label and its higher price would make quicker lauch trajectories of the bluebird gene therapies challenging to achieve.
Late Tuesday, Foroohar cut his target price on bluebird to $2 from $3. He has a Market Perform rating on the stock.
Write to Josh Nathan-Kazis at [email protected]
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