World’s most expensive drugs can’t cure what ails this biotech

In the most severe form of beta thalassemia, people undergo blood transfusions every few weeks, basically tethering them to the doctor’s office. Bluebird’s drug, Zynteglo, could be life-altering with only a single treatment (Bluebird Bio)
In the most severe form of beta thalassemia, people undergo blood transfusions every few weeks, basically tethering them to the doctor’s office. Bluebird’s drug, Zynteglo, could be life-altering with only a single treatment (Bluebird Bio)

Summary

Bluebird Bio has received attention for pricing two FDA-approved gene therapies at around $3 million, but its financial future remains uncertain

Bluebird Bio is about to become the seller of the two most expensive drugs in the US, and by extension the world, each fetching nearly $3 million.

While the high price tag is already leading to public backlash, one would think the company and its investors would at least see a huge payoff as the drugs finally hit the market. Not quite. Two approvals by the Food and Drug Administration this past summer might have rescued the company from the financial abyss, but the Boston-area-based Bluebird, which in April announced significant cost cuts to stay afloat, is going to be cash-strapped for a while.

The challenge is that the two diseases Bluebird’s therapies treat—beta thalassemia and cerebral adrenoleukodystrophy, or CALD—afflict tiny portions of the population, therefore limiting their economic potential.

Take the treatment for beta thalassemia, a genetic disease characterized by a shortage of healthy red blood cells, which leads to anemia. In the most severe form of this disease, people undergo blood transfusions every few weeks, basically tethering them to the doctor’s office. Bluebird’s drug, Zynteglo, could be life-altering with only a single treatment. It also could wind up saving money: The Institute for Clinical and Economic Review, or ICER, has estimated that the treatment could be cost-effective.

But the economics don’t work as well for investors because there are only an estimated 1,300 people with transfusion-dependent beta thalassemia in the U.S. Sales for the two treatments, Zynteglo and Skysona for CALD, might reach just over $200 million by 2030, according to Luca Issi, an analyst at RBC Capital Markets.

Contrast that with Bluebird’s cash burn rate. The company expects to go through just under $340 million this year. As of the second quarter, it had about $218 million in cash. The upshot is that Bluebird needs to raise money, and fast. The company has said it is exploring financing opportunities. But with the stock market plunging, many biotech companies have been frozen out of the capital markets, and Bluebird is no exception.

Bluebird’s struggles highlight the challenge of developing drugs for extremely rare conditions. The U.S. government does have incentives in place, such as priority review vouchers, which the FDA awards to some developers. The vouchers can be redeemed to speed up review of a future, more profitable drug, and companies often sell them to other ones. Bluebird got two and hopes to cash them in for at least $200 million, giving it some breathing room as it seeks to get a potentially more lucrative treatment for sickle cell disease approved.

The company “has a clear path to financial sustainability and considerable positive momentum as we approach the anticipated BLA filing for lovo-cel for sickle cell disease in Q1 2023," a spokeswoman wrote, adding that “Zynteglo and Skysona represent significant advances with the potential to transform the lives of patients."

The stakes go beyond just one company:Andrew Lo, a Massachusetts Institute of Technology finance professor who has long sought ways to promote investment in rare-disease treatments, says there is a risk that there could be a chilling effect on other such therapies if Bluebird doesn’t succeed. Bluebird won approval for Zynteglo in Europe, only to wind down its operations there after struggling to reach an agreement on pricing with the authorities.

Currently there are only a handful of gene therapies approved but, as more costly but potentially curative medications come to the market, payers and manufacturers will have to find a way to deal with the eye-popping multimillion-dollar price tags. One emerging solution—which Bluebird is offering for Zynteglo—is a risk-sharing agreement, which means the manufacturer could make refunds if the product doesn’t work.

The bull case for Bluebird, explains analyst Yaron Werber at Cowen, is that its technology and manufacturing could be applicable to other indications. The company is currently planning to file for approval of lovo-cel early next year. While approval certainly would boost the company’s prospects, it could still face competition. Vertex Pharmaceuticals and Crispr Therapeutics are also racing to receive approval for their gene-editing therapy to treat sickle cell. Another problem is that, while sickle cell disease offers a much bigger market, access and reimbursement remain a tough challenge. Most sickle cell disease patients are African-Americans, a population that has long lacked equal access to care.

At a market capitalization just shy of $500 million, Bluebird isn’t expensive for a biotech with two approved therapies. But the company’s shares are likely to continue to be volatile. Having the most expensive drug on the market—and even two of them—isn’t always a good thing.

 

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