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Is bluebird bio a Buy? – The Motley Fool



Genterapibe holdings received close attention from investors in 2017 and early 2018 and with good reason. New technologies to manipulate the software of life itself keep the promise of curing diseases with a single treatment. However, many of these stocks have cooled down because the reality of the challenges that stand in the way of these companies lies in.

Clinical Scenario bluebird bio (NASDAQ: BLUE) differs appear to be one of a small number of gene therapy holdings that is launching a commercial product to cure a rare and fatal disease, but the stock has gone almost nowhere with stocks selling 28% below their initial price 2018 despite breakthrough progress in the meantime. Are the shares capable of taking flight, or will shareholders fail to take advantage of the company's success?

Making Substances From a Patient's Own Body

The technology behind Bluebird's imminent money-making treatments is dependent on taking cells from the patient, replacing a defective gene that causes disease with a healthy version, and returning the cells to the patient . This ex vivo process is what powers Bluebird's first approved therapy: Zynteglo for transfusion-dependent beta-thalassemia (TDT).

  Bluebird in flight.

Image Source: Getty Images.

TDT is a serious genetic blood disorder caused by a mutation in a gene required for the production of healthy red blood cells. Patients with TDT have a lifelong dependence on red blood cell transfusions and often develop iron overload requiring additional treatments.

Zynteglo is based on Bluebird's LentiGlobin process, in which blood stem cells found in bone marrow are removed from the patient and the defective gene replaced by a virus to deliver the healthy gene. The patient is given chemotherapy to destroy the remaining defective stem cells, and then the repaired stem cells are replanted into the patient. The stem cells with now-healthy DNA then produce healthy red blood cells and the patient is cured with a single treatment. Eight out of 10 patients in a pivotal trial achieved transfusion independence and none needed a transfusion again, up to 45 months later.

Zynteglo received a conditional marketing authorization from European regulatory authorities a month ago, a monumental achievement in personal medicine that barely moved the stock price. There are as many as 2,750 patients in the four European countries where Bluebird will initially start Zynteglo with a price of nearly $ 2 million. Why have investors not picked up the shares? There are at least four reasons why Wall Street is not ready to party yet.

4 Reasons Investors Don't Celebrate Business Success

First, Bluebird plans to praise the product will spread the cash flow over several years. As if it were not enough to pioneer a game-changing biotechnology for curing disease, Bluebird is capable of pioneering a one-time payment system. The company plans to charge approx. $ 1.8 million divided into five annual payments. The first treatment fee is $ 356,000 in front, and the other four payments are subject to continued patient success.

The price seems reasonable, as rare disease treatments have been priced around $ 300,000 to $ 600,000 a year and continue for the patient's life. And sharing the risk of success with the payer is a growing tendency for expensive therapies. But for investors, the delay and risk reduce the value of future cash flows.

Secondly, there is a huge amount of infrastructure that Bluebird needs to introduce to launch Zynteglo across Europe, and that means roll-out will be slow. The treatment cannot be performed at any medical center; Qualified treatment centers must be established where the staff has specialized skills and disease expertise along with transplant accreditation. Bluebird plans to start with two treatment centers in Germany, where the addressable market is only 80-100 patients and grows from there as the company gets experience. Full European expansion will not be completed before 2021.

  Patient receives transfusion.

Image Source: Getty Images.

Third, Bluebird had some bad news when it reported on European approval. A month earlier, the company said it would start treating patients in Germany in the second half of this year, but a need to make changes in the manufacturing process and "tight drug specifications" mean that the first treatments will be delayed by 2020. months Do not be much in things, but the news just illustrates how much groundbreaking the company needs to do. A difficult manufacturing process and a complex supply chain probably means that this delay will not be the last setback we see.

Fourth, whereas the test results look very good, the patient numbers are small, so we do not really know what the final success rate will be, and it will have a direct impact on sales due to risk sharing. In an attempt at another TDT genotype, which is an important part of the company's expansion plans, success was only 50% in eight patients. And Europe's approval is conditional on further positive results from ongoing trials, so there is a chance to stumble. Bluebird says it will apply for US approval by 2020, so it's another obstacle to be cleared.

Zynteglo is just the beginning

Despite the challenges of Bluebird in the short term, the company has plenty of opportunities ahead of it. Zynteglo wants a long path of label expansion and geographic growth, but investors are even more excited about Bluebird's LentiGlobin treatment for sickle cell disease (SCD).

There are about 1,400 to 1,500 patients with TDT in the United States, sickle cell disease, a severe blood disorder that shortens the average life span to about 44 years, affecting about 110,000 people in this country. Bluebird's treatment involves altering the patient's blood stem cells to replace mutated genes responsible for producing abnormal sickle hemoglobin with genes that produce healthy red blood cells.

Last month, Bluebird reported results from a group of 13 patients treated for SCD and the results were very positive. The proportion of healthy hemoglobin has been steadily increasing in patients, and while patients experienced an average of 5.3 severe cases of vaso-occlusive or acute breast syndrome each year prior to treatment, no such events have occurred after the LentiGlobin treatment in any of the patients.

Bluebird expects to archive and approve LentiGlobin for SCD in 2022, and meanwhile, could have a 2020 approval for bb2121, a CAR-T treatment for multiple myelomas that the company participates in Celgene [19659024] (NASDAQ: CELG) to develop and approve 2021 approval for the treatment of rare disease CALD or cerebral adrenoleukodystrophy.

Even longer, Bluebird has four clinical trial treatments and six pre-clinical programs as described. It also has a gene editing platform that it added through an acquisition in 2014, which it intends to use for future in vivo therapies.

Patience is required. Lots of it.

Bluebird has a pipeline with several potential blockbuster therapies and is on the verge of its first commercial launch. Data from clinical trials has served to confirm the safety and effectiveness of Bluebird's platform, and the technological risk to the company's treatments has dropped significantly since the stock sold for $ 233 in March last year, 82% over what investors pay for it today.

The complexity of Bluebird's production and delivery infrastructure creates risks of a different kind, and that is what keeps the stock price back. It burned through $ 154 million in cash last quarter, and while it has plenty to hand and could easily raise more, it will only be 2021 that the company has a positive cash flow. And along the way, there are plenty that can go wrong and create further delay.

The value is there and investors who have patience should consider the stock. Shares will likely begin to move higher before the company is profitable, and I think it is highly likely that the stock price will increase its full-time over the next two years or so unless the company is purchased. For investors who are willing to wait, bluebird bio is a purchase.


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