Bluebird Stole the Show at ASH 2017

Bluebird's new manufacturing process confirmed the improvement in clinical benefits and their partnered CAR-T candidate with Celgene reported “unheard of” responses in myeloma. BLUE soared 20%, to over $200/share, but fell back down to $195 after announcing a $600M offering. Terms have not yet been disclosed.

Although TDT & SCD data looks promising, the real value creator is their CAR-T asset bb2121. Let’s have a look at the data.

TDT: HGB-204 (Northstar)

Bluebird announced that 9/10 Patients with non-β 0 /β0 Genotypes and 2/8 with β 0 /β0 genotypes were free from chronic transfusions. The hemoglobin remained stable in patients free from chronic transfusions for up to 3 years.

The company also announced data from 6 patients in their Northstar-2 data, which implemented the new manufacturing process. 5/6 patients were producing normal hemoglobin (>6g/dL).

In short, this data reinforced the clinical benefit of BLUE’s refined manufacturing process. Blue will be using data from Northstar & Northstar-2 to apply for approval in adults and adolescents with non-β 0/β 0 genotypes in US/EU. Expected completion date in early 2020. 

Sickle Cell: HB- 206 Reported Positive Data With Further Improvement Potential, But Competitive Threats Still Loom

In sickle cell, Bluebird announced updated data on two patients who were using the new product manufacturing and improved study protocol. Results were much better for these two patients than the original manufacturing group.

Below the two blue lines depict the 2 Group B patients. As shown, these two patients had higher globin production than all Group A patients 6 months after infusion.

Although this was early promising data, Bluebird is making additional changes to protocol which may provide even better clinical results. Early signs of the latest manufacturing change (Group C, below) are showing increased % of transduced cells and increase in CD34+ cell count. These are early indicators of improved HbA production.

We are still skeptical of Bluebird’s potential in the sickle cell indication. Although the data above is promising and could improve further, the competitive threats from Global Blood Therapeutics (GBT) are being overlooked.

At ASH, GBT announced that 6/11 adolescent patients achieved a hemoglobin response >1 g/dL with a median hemoglobin change of 1.1 g/dL. Keep in mind, that GBT is already in Phase 3 for SCD (with data out 2019), placing it ahead of Bluebird in this indication. GBT is also administered orally and could cost as little as 1/5th the treatment cost of bluebird’s gene therapy candidate. Even if BLUE’s candidate reaches market, we think commercial viability is limited.

GBT stock traded down after ASH due to news that 2/7 patients in their compassionate use program died. In our opinion, the market overreacted to this news, overlooking the fact that these patients were seriously ill (classified as having severe SCD or life threatening complications). GBT will be presenting additional data tonight (Dec 11th).

BCMA: BB-2121 Response Rates Make it a Potential Blockbuster Drug
Bluebird and partner Celgene announced updated Phase I data for bb2121, a CAR-T for multiple myeloma. Complete response rates increased from an already impressive 27% presented at ASCO to a remarkable 56% (10/18) presented at ASH. It’s important to note that 9/10 of these response rates show that the disease has been nearly wiped out.

These are heavily pretreated patients (with a median of 7 prior therapies) and prior response rates are <5% complete response and ~25-30% ORR. For comparison, bb2121 has shown 56% PR and 94% ORR. The two companies are anticipating a launch sometime in 2020 and analysts are expecting it to be a multi-billion dollar drug. Bluebird, if they exercise their option to co-develop, will receive half of profits in US. If they do not exercise co-develop option, will receive royalties ranging from mid-single digits to low-teens.

Celgene will now look to expand the addressable target market for BB-2121 by advancing the candidate into earlier lines of multiple myeloma. The BCMA-antigen space is rather competitive, with Novartis, GSK and Juno all developing candidates.

Bluebird will benefit from having Celgene as their partner. Celgene is the global leader in myeloma with blockbuster drugs like Pomalyst and Revlimid. Now they’re also in the lead to get a CAR-T drug commercialized in myeloma.

With all this being said, we still think Bluebird has built a lot of hype in their current $9+B valuation. The company was very opportunistic by announcing a $600M raise right after ASH. BLUE should have a year-end pro-forma cash balance of about $1.7B. BB-2121, their most promising candidate is still about 2 years from commercialization. We are still of the opinion that the risk/reward ratio is not compelling at these levels and suggest waiting for a pull back to add.

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