People and institutions that refuse to admit error eventually discredit themselves.”― Jeffrey Tucker

Today, we look at CAR-T pioneer bluebird bio (BLUE), a name I get a few inquiries on, it seems every month. Our current take on bluebird is provided in the paragraphs below.

Company Overview:

bluebird bio is a Cambridge, Massachusetts-based biotechnology company that IPO’d in 2013. bluebird bio is a gene therapy company developing therapeutics for individuals with severe genetic diseases and cancer. The mid-cap company has over 800 employees spanning two continents. They already have one product on the market under the brand name Zynteglo, which is approved for patients in the European Union, Iceland, Liechtenstein and Norway. The drug is a one-time gene therapy for transfusion-dependent β-thalassaemia that is meant to assist patients in reaching transfusion independence.

The company has a deep pipeline of candidates spanning a wide variety of indications within the therapeutic areas of severe genetic diseases and cancer. Most importantly, they have four product candidates with the potential to be approved by 2022. bluebird bio trades for over $80 a share and has a market capitalization of roughly $4.5 billion. As can be seen above, the stock has been more than halved from recent highs, and the stock has been one wild ride for shareholders since the company came public.

Pipeline:

Source: Company Presentation

TDT

In June of 2019, the EMA approved Zynteglo, an autologous CD34+ cells encoding βA-T87Q-globin gene therapeutic for TDT, under its accelerated review process. Transfusion-dependent beta-thalassemia is a severe, genetic blood disease. TDT is caused by genetic mutations in a gene responsible for making the β-globin protein. The protein plays an important role as a component of adult hemoglobin, which carries oxygen all over the body. Essentially, healthy red blood cells are not formed as a result of TDT, which means oxygen isn’t being carried to cells and tissue that need it to function. This condition is known as anemia. If left untreated, severe anemia can lead to organ damage and death. People with TDT is a lifelong battle that requires regular blood transfusions given every few weeks in order to combat the symptoms of anemia. Transfusion often contributes to long-term complications associated with TDT. This is where bluebird’s product Zynteglo comes in. The drug is a one-time gene that is meant to assist patients in reaching transfusion independence. It’s estimated that 1 in 100,000 people have beta-thalassemia.

Source: Company Presentation

On October 22nd, it was announced that the EMA has signed off on the refined commercial drug product manufacturing specifications for the drug. The company anticipates enrolling its first commercial patient in the quarter. Also, the drug is currently being evaluated in three ongoing trials: Phase 3 Northstar-2, Phase 3 Northstar-3 and a long-term follow-up study called LTF-303.

Source: Company Presentation

SCD:

LentiGlobin is a gene therapy being studied as a potential treatment of sickle cell disease. LentiGlobin received Orphan Medicinal Product designation from the European Commission for the treatment of SCD, and the FDA granted Orphan Drug status and Regenerative Medicine Advanced Therapy designation for LentiGlobin for the treatment of SCD. Sickle cell disease is an inherited disease caused by a single mutation in the beta globin gene, which contributes to the production of adult hemoglobin. The result is red blood cells that are misshaped, sticky, inflexible and possess a shorter lifespan. Ultimately, SCD leads to anemia and blocked blood vessels that cause serious medical conditions such as stroke. The U.S. population is estimated to be 100,000 people.

Source: Company Presentation

LentiGlobin will be evaluated in a Phase 3 trial called HGB-210, which will be open and enrolling by the end of 2019. Also, bluebird bio is conducting a long-term safety and efficacy follow-up study called LTF-303 for people who have participated in bluebird bio-sponsored clinical studies of LentiGlobin for SCD. Lastly, clinical data from HGB-206 will be presented by the end of 2019.

Source: Company Presentation

Multiple Myeloma:

Multiple myeloma is a cancer of plasma cells. The cause of the cancer is unknown, and there’s currently no cure. Multiple myeloma affects roughly 2 in 100,000 people. bluebird is collaborating with Celgene (NASDAQ:CELG) on the development of IDE-CEL, also known as BB2121, for the treatment of multiple myeloma. The drug is an anti-BCMA CAR T therapeutic. In 2017, the drug was granted Breakthrough Therapy designation by the FDA and Priority Medicines eligibility by the EMA.

Source: Company Presentation

Looking ahead, the company expects to provide updates on the registration-enabling KarMMa study and the CRB-402 clinical study by the end of 2019. bluebird bio and Celgene are targeting approval by the second half of 2020.

Source: Company Presentation

Analyst Commentary and Balance Sheet:

As of September 30th, 2019, the company had cash, cash equivalents and marketable securities of roughly $1.4 billion, compared to approximately $1.8 billion as of December 31st, 2018. Research and development expenses for the third quarter were roughly $150 million, compared to approximately $115 million in Q3 of 2018. General and administrative expenses for the quarter were $66.2 million, compared to $44.5 in Q3 of the prior year. Revenue came in at $8.9 million for the quarter with roughly 70% stemming from collaboration revenues and the rest coming from licensing and royalties. Revenue was down quarter over quarter by roughly 20%. The decrease was primarily attributable to a decrease in collaboration revenue from the company’s relationship with Celgene. Overall, the company had a net loss of roughly $205 million in the quarter, compared to a net loss of approximately $145 million in the same period of last year.

BLUE has become a real ‘battlefield stock’ among analysts since posting Q3 results late in October. The dozen analyst firms that have reissued ratings since then are roughly split between Buy and Hold. It should be noted that most of the recent Buy ratings contain downward price revisions.

Verdict:

Midcap CAR-T plays have been a hotbed somewhat for M&A activity over the years with both Juno Therapeutics (JUNO) and Kite Pharma (KITE) being bought out. Occasionally bluebird gets mentioned as a possible acquisition target but doesn’t appear on the top of analysts’ buy-out lists.

The company has multiple ‘shots on goal,’ but its most promising candidates are aiming at what are becoming crowded fields. I am pretty much in line with Stifel’s conclusion last month on bluebird after its ASH presentation.

The bb2121 KarMMa data reported by Bluebird Bio “looks approvable” and likely will lead to Bluebird having a first mover advantage in multiple myeloma. However, although he sees Bluebird as “clearly ahead of competitors,” the analyst thinks it will be tough for the stock to appreciate beyond a small rebound given there are “so many me-too programs advancing behind them,” including Janssen’s (JNJ) JNJ-4528, which generated “high ORR.” The analyst, who keeps a Hold rating and $96 price target on Bluebird shares, added that LentiGlobin continues to look impressive in sickle cell disease, but that disease area “has become a hotbed for gene therapy/gene editing development.

Given that, bluebird bio only rates as a small ‘watch item’ for those that want more exposure to the CAR-T space. If the stock pulled back to the low to mid-$80s, I would also consider a near-term trade using buy-write orders. Option premiums are lucrative and liquidity is quite good in this name for those option traders out there. This is the way I am currently playing this name in my own portfolio.

The only thing that saves us from the bureaucracy is inefficiency. An efficient bureaucracy is the greatest threat to liberty.”― Eugene J. McCarthy

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum

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Disclosure: I am/we are long BLUE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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2020-01-12