Health

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.

Well, that was fast:

Bluebird Bio Inc. this week announced it was selling $250 million in new stock, not long after announcing promising, and share-price-boosting, developments for its medicines. The stock sale was a bit of a surprise; Bluebird just a month ago said it had cash to keep running until 2019. 

But an opportunistic share sale is the right move for a company developing ambitious medicines that are prone to setbacks. And the timing looks particularly smart, or at least lucky, as Donald Trump's comments on high drug prices hit Bluebird's shares, along with the rest of biotech, the day after the new shares priced.  

Jump Stumped
Bluebird Bio's share price rose on positive scientific news this week, but fell with the rest of the industry after Donald Trump said he wanted to bring drug prices down
Source: Bloomberg
Intraday times are displayed in ET.

This year has been rough sledding for Bluebird, which develops gene-altering potential cures for rare diseases and modifies immune cells to fight cancer. Fevered hype over its lead gene therapy turned into fevered skepticism after trial data showed it didn't work as well for some patients as for others and that perfecting it would take time. 

At one point, Bluebird's shares were down as much as 81 percent from 2015 highs, battered by diminished expectations and overall malaise in the sector.

Bluebird has mounted a furious recovery over the past few weeks, though. Shares rose as much as 91 percent from their most recent low after the company published promising early data on a cancer treatment and enrolled the first patient in its next generation of gene-therapy trials.  

Bluebird has previously used share-price boosts from scientific success to extend its cash runway; its past year of struggle was a reminder of the wisdom of that approach.

Opportunistic
Bluebird has tended to leap on the opportunity to sell high on its shares
Source: Bloomberg

It's better to elicit some investor gripes over dilution now than to risk having to raise funds when share prices are in the doldrums after, say, a clinical setback.

Take Juno Therapeutics Inc., for example, a Bluebird competitor in the race to tweak immune cells to fight cancer. The formerly high-flying firm has seen its share price crushed after several patient deaths delayed its lead treatment. Juno has a solid cash runway, which will come in handy, given it may be years from getting a drug to market, along with its grim current prospects for raising more money. An extra few quarters' worth of peace of mind and added flexibility are always valuable.

Cashed Up
Bluebird had cash to spare before its latest fundraising, but was also burning through it
Source: Bloomberg

Extra cash gives Bluebird more leeway to take its time and invest in research that will lead to future treatments and improvements.

And Bluebird's need for cash won't just disappear with the approval of its first medicine. Launching potential one-time cures is commercially tricky; the market doesn't quite know how to price them. A nice cash cushion will serve Bluebird well during this process. 

The next few years will be bumpy. Bluebird is lucky to be able to grab extra padding. 

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