Vertex Pharmaceuticals and CRISPR Therapeutics may benefit from bluebird’s troubles.
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The news on Tuesday that the gene therapy pioneer bluebird bio was suspending trials of its gene therapy for sickle cell disease, plus suspending marketing of another gene therapy approved in Europe to treat beta thalassemia, sent shares of the stock down 37.9% over the course of the day.
The suspensions came after a patient who received the sickle cell gene therapy was diagnosed with acute myeloid leukemia. Bluebird (ticker: BLUE) is investigating the case to determine if the patient’s cancer diagnosis is attributable to the treatment.
Now, Wall Street analysts are reassessing their expectations for bluebird bio. One influential analyst, J.P. Morgan’s Cory Kasimov, downgraded the stock on Wednesday to Neutral, from Overweight.
“Although details are understandably limited at this point, it is hard to see how this news doesn’t have some clinical, regulatory, and eventually commercial implications…regardless of what further investigation uncovers,” Kasimov wrote.
He wrote that the disclosure of the cancer scare “represents another big hit to the already depressed sentiment” around the stock, and that it “may have broader implications for the gene therapy (or even gene editing) field.”
Meanwhile, bluebird’s stumble could be a positive for Vertex Pharmaceuticals (VRTX) and CRISPR Therapeutics (CRSP), which are collaborating on a gene- editing therapy to treat beta thalassemia and sickle cell disease that would compete with bluebird’s gene therapies.
“We think the delay in [the bluebird bio] studies is a big positive for VRTX/CRISPR since our checks have suggested that whoever gets to the market first may take more share,” Cantor Fitzgerald analyst Alethia Young wrote on Tuesday. “Before this update, we had assumed BLUE would get there before [the Vertex program], though we think [the Vertex] data is very robust.”
In addition to Kasimov’s downgrade, SVB Leerik’s Mani Foroohar, who rates bluebird Outperform, cut his target price on bluebird to $69, from $99. Bluebird shares closed Tuesday at $28.44. Foroohar wrote that his price-target change came from an update to his financial model that pushed back the launch of various bluebird bio gene therapy products by a year, and from cutting his estimate on the programs’ probability of success to 75% from 90%, among other things.
Bluebird didn’t immediately respond to a request for comment on the downgrade. But in an investor call on Tuesday, the company’s CEO, Nick Leschly, said that the company would investigate the cause of the patient’s cancer, and of a case of myelodysplastic syndrome in another patient in a trial of the sickle cell drug.
“There are multiple possible explanations,” Leschly said. “Our plan is to execute our full medical and scientific investigation on these two cases as quickly as possible in order to speak both thoughtfully and clearly about the current situation and implications.”
Some analysts argued that the news should have no impact on the stock’s valuations. Cowen analyst Yaron Werber wrote that bluebird’s oncology pipeline alone was enough to support its market capitalization. “At the current valuation, we believe BLUE is trading based on its oncology assets with LentiGlobin as upside,” Werber wrote on Tuesday. “We are constructive on the opportunity in oncology.”
The company said earlier this year that it will spin off its cancer programs.
Write to Josh Nathan-Kazis at [email protected]
