What happened
After hitting record all-time highs in March, shares of bluebird bio (NASDAQ: BLUE) have been retreating. As a result, the clinical-stage gene therapy company is now down 11.9% though June, according to S&P Global Market Intelligence.
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So what
In January, the company outlined plans that include three potential regulatory filings for approval by the end of next year. The potential to transition from a clinical-stage company into a commercial-stage company helped bluebird bio’s shares climb above $220 in March; however, the corresponding $10 billion-plus market cap may have priced the company for perfection.
Although the data from bluebird bio so far looks good, investors have been ratcheting back exposure to the company to reflect what’s emerging to be a very competitive marketplace.
Specifically, a number of companies are working on therapies that could chip away at the commercial opportunity for its drugs, including LentiGlobin, a gene therapy for beta thalassemia. Patients with this disorder can’t produce beta globin, and as a result, they require regular red blood cell transfusions that expose them to risks, including organ-damaging iron overload.
LentiGlobin’s data suggests it may significantly reduce or eliminate transfusions, but Acceleron Pharma (NASDAQ: XLRN) and Celgene Corp. (NASDAQ: CELG) expect to report data for luspatercept in beta thalassemia soon, and if that data’s good, it could dent LentiGlobin’s peak sales potential. Similarly, Sangamo Therapeutics (NASDAQ: SGMO) is working on a zinc-finger nuclease gene-editing solution, and separately, Vertex Pharmaceuticals (NASDAQ: VRTX) is teamed up with CRISPR Therapeutics (NASDAQ: CRSP) to tackle beta thalassemia using CRSPR/Cas9 gene editing.
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Competition could be fierce in sickle cell disease, too. In June, bluebird bio reported some intriguing data for LentiGlobin in sickle cell disease, but Sangamo Biosciences and Vertex Pharmaceuticals are targeting that indication with their gene editing therapies as well.
Furthermore, although bluebird bio has a big head start developing a chimeric antigen receptor T-cell (CAR-T) therapy targeting the BCMA protein expressed by cancer cells in multiple myeloma patients, it’s not alone in investigating that approach. In June, Johnson & Johnson (NYSE: JNJ) highlighted plans to start a phase 1b/2 trial soon for its own BCMA-targeting CAR-T, JNJ-68284528.
Now what
It’s anyone’s guess how this all shakes out, but I think bluebird bio has a good shot at securing regulatory OKs in the next two years for LentiGlobin and bb2121 and that each has the potential to be a top seller.
Of the two therapies, I’m particularly interested in bb2121’s opportunity. It’s being co-developed by Celgene, and Celgene already markets the most widely used first-line multiple myeloma therapy, Revlimid, and third-line multiple myeloma therapy, Pomalyst. Given that this is a multibillion-dollar market and Celgene is the market-share leader, I think bb2121 could hit the ground running and quickly become widely used in the fourth-line setting and higher.
Overall, bluebird bio has multiple regulatory shots on goal, and that could make it more valuable to an acquirer than Kite Pharma and Juno Therapeutics, two gene therapy companies that have already been acquired for more money than bluebird bio’s current $8.5 billion market cap. If I’m right, then bluebird bio’s declining share price this year will prove itself to be a buy opportunity.
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Todd Campbell owns shares of Bluebird Bio and Celgene. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Bluebird Bio and Celgene. The Motley Fool owns shares of CRISPR Therapeutics and Johnson & Johnson. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
