Is Now a Good Time to Buy This Biotech Stock?

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To say that biotech Bluebird Bio (BLUE -10.43%) has significantly lagged the market in the past year would be an understatement. Shares of the gene-editing focused company have dropped by 89% in the trailing 12-month period, primarily due to various regulatory headwinds.

However, Bluebird recently received some good news that may signal a comeback is in the cards for the biotech. With this backdrop in mind, let’s find out whether now is a good time to get in on Bluebird.

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Are regulatory nods imminent for Bluebird?

Understanding Bluebird’s most recent developments requires some background. Last year, the company submitted two gene-editing therapies to the U.S. Food and Drug Administration (FDA) for review. The first was beti-cel, a potential treatment for a rare blood disorder called transfusion-dependent beta-thalassemia (TDT). Beti-cel’s PDUFA goal date (the latest date by which the agency should complete its review of Bluebird’s application) is Aug. 19.

Then there is eli-cel, an investigational treatment for a pediatric neurodegenerative disorder called cerebral adrenoleukodystrophy (CALD). Eli-cel’s PDUFA goal date is Sept. 16. Earlier this month, Bluebird announced that two advisory committees convened by the FDA to discuss the clinical benefits and potential approval of these two gene-editing therapies had endorsed both beti-cel and eli-cel.

On the question of whether the benefits associated with the treatments outweigh the risks for the concerned patient population, the 13-member committee tasked with discussing beti-cel unanimously voted “yes.” Meanwhile, on the same question, the 15-member committee tasked with examining the merits of eli-cel also unanimously voted in the affirmative.

That’s excellent news for Bluebird. True, the FDA is not obligated to follow the lead of these committees, but it usually does. And if both therapies earn approval, they could be highly successful. There are few effective treatments for TDT or CALD. Beti-cel and eli-cel would be a welcome sight for patients suffering from these rare illnesses. 

Exercise caution 

Although Bluebird looks to be on the verge of earning approval for both eli-cel and beti-cel, there are still plenty of factors to consider, even putting aside the fact that the FDA could still surprise everyone and decline to approve these therapies.

First, the company is likely still dealing with financial troubles. Management announced in the company’s fourth-quarter earnings press release that the $442 million in cash and cash equivalent it had as of the end of the fiscal year 2021 could come short of what it needed to complete the current fiscal year.

Bluebird has since implemented expense-cutting strategies, and the company hopes these measures could save it $160 million in the next two years. Still, it is worth keeping these troubles in mind. Launching new therapies on the market isn’t cheap, and if both beti-cel and eli-cel earn approval and Bluebird’s shares soar, the company could decide to issue new shares in an attempt to raise funds, a move that small-cap biotechs are fond of doing.

However, it would dilute existing shareholders and send Bluebird’s shares back down. The last time Bluebird conducted a secondary offering was in May 2020.

There are a few more issues to consider. First, the pricing of both eli-cel and beti-cel could be highly prohibitive. Both eli-cel and eli-cel were originally approved in the European Union. Beti-cel was marketed as Zynteglo, and it was priced at 1.58 million euros over five years.

While insurance coverage could help patients get access to these therapies, don’t forget that Bluebird pulled both beti-cel and eli-cel out of the European market in part because it was unable to strike deals with third-party payers. Second, gene-editing treatments are complex, a fact that could further slow and complicate matters. When beti-cel earned approval as Zynteglo back in 2019, Bluebird said, “Due to the highly technical and specialized nature of administering gene therapy in rare diseases, bluebird bio is working with select qualified treatment centers that have expertise in stem cell transplant and treating patients with TDT to provide Zynteglo.”

Of course, investors can’t predict the details of the launch of beti-cel and eli-cel in the U.S. Perhaps Bluebird won’t face the same set of issues domestically, but it’s worth keeping these potential obstacles in mind. Still, while risks abound, eli-cel and beti-cel are likely worth far more than Bluebird’s tiny market cap of $254 million seems to indicate.

The stock does remain risky, but a little less so after the thumbs-up from the committees convened by the FDA. That’s why for those investors with above-average risk tolerance, now is a great time to consider opening a (small) position in this biotech stock