Few drug developers successfully bring a product to market. Fewer still earn multiple regulatory approvals. Bluebird Bio (BLUE) is one of the lucky exceptions after earning FDA approval for Zynteglo and Skysona in the third quarter.
Yet, investors cannot be assured the company will survive.
An exodus of executives, a precariously low cash position, and a fierce competitive landscape suggest the gene therapy pioneer still may not live up to expectations. The dismal outlook follows a messy separation of business units and a court settlement following allegations Bluebird Bio hijacked and sidelined the intellectual property now used in Zynteglo from a smaller drug developer named Errant Gene Therapeutics years ago.
The biotech stock remains a case study in the importance of evaluating all risks encountered in drug development using a bottom-up approach to investing.
Oh, What Could Have Been
If Bluebird Bio crashes and burns after earning its first FDA approvals, then it might be a fitting end considering the company's rocky history.
The company was founded as Genetix Pharmaceuticals in 1996. However, in 2003 the FDA halted all gene therapy clinical trials following patient deaths from first-generation tools used in the late 1990s and early 2000s. Genetix Pharmaceuticals became one of the first to plow back into clinical trials shortly thereafter with its LentiGlobin platform in sickle cell disease and beta thalassemia. Twenty years later, similar tools (potentially misappropriated) and learnings would become the product known as Zynteglo.
All gene therapies utilize a vector to deliver corrective genetic material into a patient's cells. These vectors are typically derived from inactivated viruses, which naturally package genetic material to specific cells inside the human body. The accuracy of delivery and errors of insertion can make certain types of gene therapy dangerous and deadly.
The earliest gene therapy candidates used adenovirus (Ad) viral vectors, which were more akin to a shotgun blast than a surgeon's scalpel. Genetix Pharmaceuticals decided to develop lentiviral vectors (LVV) instead. Although these types of vectors could only be used in the laboratory once cells were extracted from a patient's body, they were generally considered safer than Ad vectors.
That hypothesis quickly unraveled. LVV carry a risk of inserting genetic material into the wrong part of a patient's genome, which can awaken or cause cancerous mutations. These risks and concerns were one reason bluebird bio's regulatory applications were delayed many years.
It also explains why most gene therapies today utilize adeno-associated virus (AAV) vectors, which can be delivered directly into a patient and have a lower risk of integrating into a patient's genome. bluebird bio may be the last drug developer to earn approval for an LVV-based gene therapy.
Genetix Pharmaceuticals, which later became Bluebird Bio, faced several stops and starts in the last two decades relating to side effects in clinical trials and manufacturing delays. Most drug candidates don't require 20 years of development to reach market. In this case, the delays may have sowed the company's fate by exposing it to better-funded competition.
Caution: Uncertainty Ahead
Bluebird Bio faces no shortage of challenges.
- The business ended June 2022 with only $132 million in cash, or $218 million if investors generously include restricted cash. It may require $500 million or more just to launch Zynteglo and Skysona. This is a good reminder that although a phase 3 clinical trial is treated as the final bookend in drug development, it marks only the first chapter in a drug product's commercial life. Most drug developers actually lose more money in the first year or two after earning their first regulatory approval.
- Competition is brewing. CRISPR Therapeutics (CRSP) and Vertex Pharmaceuticals (VRTX) expect to soon ask the FDA for approval of a gene-editing drug candidate for the treatment of sickle cell disease and beta thalassemia. It would directly compete with Zynteglo and represent better funded competition, although the challenger faces its own headwinds in terms of patient convenience, insurance coverage, and pricing.
- A steep increase in commercial expenses and challenges from the competitive landscape make it increasingly difficult for Bluebird Bio to raise additional capital. A market cap of $473 million leaves little wiggle room to raise capital through a stock offering, while few deep-pocketed drug developers may see a promising risk-reward profile for coming to the gene therapy pioneer's aid.
The cautionary tale of Bluebird Bio serves as a case study for biotech investors. It's one thing to develop innovative tools and earn regulatory approvals, but those alone don't pay the bills. Successful drug developers must navigate development, regulatory, commercial, and financial risks. Unfortunately, this long-struggling biotech might not make it if it remains a standalone company.
