Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Bluebird Bio, one of the hottest stocks in the red-hot areas of gene therapy and cancer immunotherapy, has spent the past few months being doused with big buckets of ice water.

Its market cap has been cut in half from a summer peak of over $6 billion, after a big biotech selloff hit risky, early stage companies hardest. On Thursday alone, the stock plunged 22 percent, the biggest drop since the company's 2013 IPO, after it revealed in an abstract that its most-developed treatment may not work as well for a subset of people with the most severe genotype of the disease it treats.

But that looks like a strange, panicky overreaction from investors, who seem to think that a near-miraculous drug isn't good enough. They seem to want a 100 percent cure, 100 percent of the time, when the company is still figuring out exactly how the treatment works in different types of patients. Shares regained some ground on Friday.  

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It's easy to see why expectations might get overheated. Gene therapy is exciting stuff. It uses viral vectors to swap healthy genes in for malfunctioning ones and raises the genuine possibility of one-time, possibly permanent cures for devastating diseases. And hysteria works both ways: Bluebird's shares spiked 72 percent last year when it first announced that one of its therapies succeeded in a few people.

Considering the vaporization of nearly a quarter of the stock's value in one day, you'd think the news on Thursday seriously called the treatment's viability into question. That's not the case here. The drug in question, LentiGlobin, treats beta-thalassemia, a genetic disease that restricts production of a molecule that carries oxygen in the blood, leading to dependence on blood transfusions. The drug may also be able treat severe sickle cell disease. 

The data released on Thursday found that four people with a less-severe type of the disease didn't need transfusions for at least 90 days and as long as 18 months. They look, at least for now, cured. However, three people with the more severe genotype still needed transfusions, though fewer than they would have without the treatment. This more severe subset makes up about one-third of the population with the disease, according to Bloomberg.

The limited data show there's a genetic variation in how this therapy works and that its biology is complicated -- not that it's a failure. Even if people with the most genetically severe form of the disease aren't totally free from transfusions, reducing their frequency could still make it a viable treatment for them. And toxicity results look good so far, suggesting the company may be able to ramp up the dosage and make it work for the rarer genotype, according to Bloomberg Intelligence analyst Asthika Goonewardene. 

This stock plunge isn't a unique reaction, but fits a pattern of behavior for the stock. A particularly telling case came when Bluebird's shares plunged as much as 18 percent on October 19, on the news that a patient who had been living transfusion-free for seven years needed two this year. It was taken as a sign that the treatment won't last, a key fear for gene therapy.

But that patient had been treated with the very first generation of a drug that has vastly improved. The old version took a year to end the need for transfusions. The most recent version can do it in under two weeks.

And let me remind you: The old version controlled the disease for seven years. But in the current environment for biotech stocks, even the mildest bad news seems to provoke a violent reaction. 

The rest of the study data, coming in December, will add needed context. For now, analysts are highly optimistic, seeing in Bluebird the potential for a highly effective platform for gene therapy and cancer treatment.  

Bluebird Of Unhappiness
Bloomberg

Of course, a $3 billion valuation for such an early stage company is still high. Bluebird is unlikely to have anything on the market or see profit from its drugs until at least 2018. Concerns about the lasting effectiveness of gene therapy remain. There are regulatory issues and questions about how exactly patients will pay for such expensive, one-time treatments. And the techniques Bluebird uses may eventually be eclipsed by CRISPR technology, an increasingly popular and extremely precise method of editing genes.

Negative developments in any of those areas would be fine excuses for a spot of panic. But one abstract and a few blood transfusions aren't.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net