Last week, Vertex Pharmaceuticals (NASDAQ:VRTX) announced that it would pay CRISPR Therapeutics (NASDAQ:CRSP) a whopping $900 million to take more control of the duo’s gene therapy collaboration, CTX001. CTX001 is being investigated as a potentially curative treatment for severe sickle cell disease and beta thalassemia, a rare blood disorder. bluebird bio (NASDAQ:BLUE) is hoping that two of its most mature gene therapies, LentiGlobin and beti-cel, could treat the same two conditions.
Beti-cel is already on the market in the EU for beta thalassemia, but Bluebird is still facing a slew of problems in the U.S. and in major European markets. Even before the recent difficulties, investors have been fleeing its stock for years. Will Vertex’s new strategy push Bluebird’s stock further into decline, or is Bluebird’s lead in the clinic durable enough to deliver a substantial first-to-market advantage?
With Vertex now in the driver’s seat, Bluebird should be sweating
It’s important to note that Vertex’s new investment in CRISPR Therapeutics isn’t a total buyout of the rights to CTX001. The pair merely revised their pre-existing collaboration agreement, such that Vertex is now responsible for 60% of the costs and entitled to 60% of the profits instead of the previously agreed 50% share. But the new deal also means that Vertex is the leader on the project, which has several implications.
With Vertex at the helm, it can bring more of its clinical development, manufacturing, distribution, and patient outreach capabilities to bear on making CTX001 a worldwide success. For all its merits, CRISPR Therapeutics is simply too early-stage of a biotech to have much in the way of those resources — it have any of its own products on the market yet. Moving forward, investors can expect the project to encounter less friction across a swath of different challenges over CTX001’s development lifetime as a result.
Then there’s the more immediate issue for Bluebird investors: On April 26, the European Medicines Agency gave a priority review designation to CTX001 for beta thalassemia. This means that Vertex could soon catch up and start to contest the market share of Bluebird’s beti-cel in the EU. CTX001 will eventually compete with Bluebird’s sickle cell drug LentiGlobin, too.
For a highly profitable company like Vertex with a handful of cash cow drugs on the market, the revenue growth implications of an EU approval for a new drug aren’t so massive. But for a smaller and unprofitable competitor like Bluebird, which at present is only generating revenue from one drug in one geographical market, a powerful new entrant could be a huge problem.
Don’t expect Bluebird to collapse anytime soon
Investors shouldn’t write off Bluebird just yet, even if its near-term future looks somewhat grim. LentiGlobin is currently in phase 3 clinical trials, and the same goes for beti-cel in the U.S. In contrast, CTX001 is still in its phase 1/2 clinical trial for both sickle cell disease and beta thalassemia, so it’s at least a couple of years behind LentiGlobin and beti-cel in the development process.
This means that Bluebird can continue to grow its market share and extract revenue for some time, though shareholders probably wish that it would do so a bit faster. Year over year, its quarterly revenue growth was only 7.1%, which is quite low, considering that beti-cel launched in early 2019. And this slow rate of growth may not accelerate anytime soon, especially considering that on April 20 Bluebird announced that beti-cel would be withdrawn from the German market over a pricing conflict with regulators there.
Separately, while it’s true that Bluebird may struggle with competing for market share, it has other projects in the pipeline that could hit the market before CTX001. In particular its Lenti-D gene therapy for cerebral adrenoleukodystrophy is in phase 3 clinical trials, and its ide-cel gene therapy for treatment-resistant multiple myeloma recently scored a key approval from regulators. Success in either of these projects would relieve the looming competitive pressure on its revenue, not to mention restoring some confidence in its stock.
Then there’s management’s plan for Bluebird to spin off its oncology business into a separate company. That could leave its severe genetic disease business responsible for LentiGlobin and beti-cel with fewer resources to succeed, or it could leave them with a nimbler structure — it’s simply too early to tell. Either way, rumors of Bluebird’s demise are very much overblown. While I wouldn’t bet on its stock to outperform Vertex’s anytime soon, there’s a strong chance it will weather the intensifying competition between the two, at least for the next few years.
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