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.

It turns out curing people of diseases by swapping out faulty genes with a virus isn't a walk in the park.

At the annual conference of the American Society of Hematology this past weekend, formerly red hot biotech Bluebird Bio presented new data on its efforts to use this approach to cure sickle cell anemia and beta-thalessemia, diseases affecting the ability of blood cells to carry oxygen. The results were mixed. Though one French sickle cell patient hasn't needed blood transfusions or a hospital visit for 9 months, two U.S. sickle cell patients have been far less responsive to treatment.

Investor reaction was harsh. Shares were down 31 percent to $55 on Monday, basically back to where they were a year ago, after flirting with $200 this summer. 

A Lost Year
After a year of ups and downs, Bluebird is right back where it started.
Source: Bloomberg

Analyst response was less emphatic. There were a few downgrades, some brutal. Morgan Stanley's Matthew Harrison removed his buy rating and cut his price target for Bluebird to $69 from $143. Roth Capital Partners analyst Elemer Piros cut his price target to $62 from $121. (The average price target for analysts tracked by Bloomberg is $132.) On the other side, JPMorgan's Cory Kasimov kept a buy rating and $164 price target. He suggested there's plenty of time and room for Bluebird to tweak the treatment and for results to improve.

That's an important point, one Bluebird has been really bad at communicating to investors: Results can change dramatically from patient to patient as the company refines the way it administers the drugs. Considering the complexity of these treatments, fine-tuning them may take longer than investors expect. 

The failure to get that message across, and high expectations built by a few early and extreme successes -- Bluebird stock initially skyrocketed after it presented positive early data on its beta-thalessemia treatment at this same conference a year ago -- have contributed to a tough ride for the company. 

Monday's big drop is the third such dive in the past couple of months. The first came on the news that its beta-thalessemia treatment doesn't work as well for a subset of people with the disease. The second came when investors panicked over an analyst note suggesting the company's treatments might take longer than expected to work fully. The company went on to announce it would split future studies based on the severity of the disease, which investors took as a sign the treatment might not work for some patients.  

The company has only preliminary theories on why its results vary so much. In the latest data, patients may not have had enough of their diseased bone marrow removed before they got the treatment, which may be slowing down their progress. It seems likely that, with refinement and care, better results will come. 

But Bluebird is clearly doing a bad job of managing expectations. There's pressure to be unceasingly positive in an industry where a drug's success is frequently all or nothing. That's particularly true of gene therapy, when the treatments are so novel and there's a record of tragic failure. But when sample sizes are so small and data so preliminary, positive results can lead people to expect that the company will have a cure every time. And disappointing data can look much worse than they should. Hyping good results and getting defensive about bad ones, as Bluebird has done at times, is a great way to have a huge amount of volatility, especially when presenting data on a few patients at a time.

CEO Nick Leschly has criticized short-term investors, saying he's running the company for the long term. He needs to give a better sense of exactly what that means, and rethink a communications strategy that has led to so many abrupt swings. He's starting to emphasize how early in the process they are, but has been light on specifics. While he's apparently done a pretty good job of talking analysts through his plans, he needs to preach patience more effectively and broadly everywhere else. 

Of course, Bluebird isn't the only sickle cell disappointment lately: Global Blood, which is taking a different approach to the disease, also came up short with its data release at ASH, according to investors. That may give Bluebird a bit more runway.  

Tough Crowd
Investors did not react kindly to GBT's data on its sickle cell drug
Source: BLoomberg
Intraday times are displayed in ET.

It's lot to ask for a company to condition the investing world to a different model of drug development. But if Bluebird doesn't at least try harder, its bumpy ride will continue.

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

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Max Nisen in New York at

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Mark Gongloff at