sankai
Main news
Since my last article about bluebird bio (NASDAQ:BLUE), the gene therapy biotech focusing on haematological disorders, they have launched their first product and are finally on track to begin generating income. They also obtained a second accelerated approval by the FDA. Their main challenge remains generating sufficient cash flow, dependent on the success of the Zynteglo and layer Skysona.
Portfolio approvals
This year saw bluebird bio gain FDA approval of their first product, Zynteglo, a gene therapy indicated for treatment of beta-thalassaemia. Designed as a one-dose treatment, it offers a curative option for this rare, genetic, lifelong condition that otherwise requires lifelong blood transfusions. While it was originally approved in Europe, Zynteglo was soon discontinued due to regulators being unwilling to pay the eye-watering price of $1.8 million per treatment.
bluebird bio seems more confident about Zynteglo’s chances in the US, achieving FDA approval in August. The first patient is expected to begin treatment in quarter four of 2022, with payment expected on infusion. This time it has an even higher estimated price of $2.8 million per treatment, which does not include the additional associated hospitalisation costs. The next challenge will be to convince insurers of its value. bluebird bio remains adamant that the high price tag for a one-time curative treatment remains cost-effective over a lifetime of ongoing treatment, and are considering a possible rebate of 80% for patients who do not achieve transfusion independence.
While FDA approval is a critical step, bluebird will still need to convince payors of the value of their products. Their own calculations suggest Zynteglo will offer significant savings over standard beta-thalassaemia treatment. The current lifetime cost is estimated at $6.4 million, making the $2.8 million price tag a possible cost efficient option. However, insurers must be convinced of this, and may still rather to pay a higher cost spread over time than a large up-front sum.
In their September presentation, bluebird estimates that around 55 – 60% of the 1,500 beta-thalassaemia patients in the US will be eligible for treatment, or around 850 patients. Rough calculations, assuming perfect patient recruitment, gives possible best case gross revenues of up to $2.38 billion for the current patient population, although this is of course an optimistic situation.
The second piece of good news came in September, when the FDA granted accelerated approval for Skysona. Also known as eli-cell, Skysona is another gene therapy treatment indicated to slow progression of cerebral adrenoleukodystrophy (CALD) in boys aged 4 to 17 years old. CALD is a rare neurological condition that was previously only treatable with stem cell transplants. However, as part of the accelerated approval agreement, bluebird must provide long-term data to the FDA.
Their final product, lovo-cel, is designed for treatment of sickle-cell disease, a genetic blood disorder affecting around 100,000 people in the US. Of these, around 20,000 are expected to be eligible for lovo-cel treatment. This means lovo-cell is the product with the biggest potential eligible market. bluebird hopes that they can seek approval from their latest trial data, for which all patients involved have now been treated.
The FDA placed a clinical trial hold on the trial in December 2021 for patients under the age of 18, although trial activities are continuing for patients aged 18 and older. While approval of their first two products is a big win for the company, especially after the multiple clinical holds imposed, it will be approval of lovo-cell that will be the major win for bluebird bio. The large patient population would mean potentially constant and reliable income. bluebird is planning on submitting their biologic licensing application (BLA) in the first quarter of 2023.
Gene therapies are associated with high costs. Just recently, a haemophilia B gene therapy was approved with a $3.5 million price tag, making it the world’s most expensive treatment. But gene therapies are slowly becoming more common, and their price tags are becoming more accepted. This is good news for bluebird, as insures and other payors become more aware of these expensive products, hopefully making them more amenable to reimbursement.
Nationwide distribution network
Part of the challenge associated with gene therapies is the complex nature of the therapy. To manage this, bluebird is planning on treating patients at specialised qualified treatment centres (QTCs) across the US, with a focus on high prevalence states. The first wave of these were established in September 2022, with numerous other planned to reach around 50 centres by the end of 2023. This network is central to ensuring patient access, which is particularly important for the commercialisation of Zynteglo, due to the relatively small number of eligible patients expected.
Risks
From an overall product standpoint, bluebird bio appears to be on track for success. However, the fact remains that they have yet to bring in revenues. The main risk to bluebird bio stem from cash flow concerns, as despite having an approved product, the complex and expensive nature means product revenues from the US are yet to materialise. Looking at their third quarter report, total revenues fell from $1.02 million, down to $71,000 between the three months up to September 2022 and 2021.
This drop is thought to stem from the closure of European operations. On the other hand, loss from operations fell from $154 million to $84 million over the same period, while net loss per share improved from 3.16 to 0.94, suggesting some the streamlining process is having some effect. Either way, a cash injection is needed. This is further highlighted by a current gross and net burn rate of the last quarter are at 0.78. For a company without a current revenue, this is quite a stark reminder of the precarious position bluebird is in.
Their quarterly results expressed concessions about their concerns for their future, expressing doubt about their ability to continue. While they have made streamlining efforts, such as reducing office space and reduced overall spending, and they stated in their latest quarterly report they expect their current cash levels will be sufficient to see them at least through to the second quarter 2023, they remain a company in deficit who are relying on the success of complex new treatments. As of September 2022, they hold an accumulated deficit of $4.02 billion. Failure to bring in revenues soon will mean they will be left with large bills to pay without any income.
Conclusion
bluebird bio remains a speculative company. The approval of their first products means the business can start bringing in much-needed revenues. Their third quarter results expressed concerns about their future due to cash flow concerns. Since my last article on bluebird bio, they have had two product approvals which put them in a better position they were compared to last year. Cash flow challenges remain an important concern, and successful commercialisation is critical.
Approval is one thing, but bluebird must still convince insurers and patients to pay the huge price tags. Failure to do so will leave them in a very precarious position. And with a pipeline without alternative products close to market, the next year will likely be the decider for bluebird. The position of bluebird is precarious. If they can bring in revenues soon, they should be able to continue enough to grow sales and capitalise on their likely bigger selling products. If not, they will be left in a very difficult position.
Bluebird bio remains a speculative investment. For those already holding and comfortable with the risk, then maybe holding a bit longer may be worth the significant risk, although playing it safe and realising any profits would not be a bad idea. However, for anyone looking for a safer investment, bluebird bio may still be too much of a risk.
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