Cheer Up

Bluebird Bio Shouldn't Be Blue

Far from a third wheel, the biotech is still a tempting target.
BLUEBIRD BIO INC
-13.90
At Closing, June 15th
183.10 USD
CELGENE CORP
-0.31
At Closing, June 15th
78.08 USD

Celgene Corp.'s $9 billion purchase of Juno Therapeutics Inc. might have Bluebird Bio Inc. feeling like a third wheel.

The deal announced on Monday means Bluebird -- which, like Juno, is working on so-called cell therapies that train human immune cells to hunt cancer -- likely loses its most obvious potential deal suitor. And Celgene has since 2016 been licensing a Bluebird treatment for multiple myeloma. Juno has a similar research program, and now Celgene has a rather awkward overlap. 

Celgene went out of its way on Monday's deal call to heap praise on Bluebird's drug and emphasize its commitment to that partnership. And Bluebird shares were up 12.5 percent on Monday, even though it seems less likely Celgene will buy the company. The fact is, Bluebird is still an attractive takeover target.

Green Period

Bluebird investors aren't blue about the company's prospects after Celgene's Juno deal

Juno's lead drug trails competing efforts from Novartis AG and Gilead Sciences Inc. Bluebird's cell therapy, meanwhile, targets a different protein than Juno's. It also has competition, but looks likely to be the first in its class to market. It has produced stellar trial results so far. If the Juno deal somehow forces Celgene and Bluebird apart, then Bluebird will fully own this program, making it even more attractive. 

Bluebird is also a more diversifying bet than Juno; it's not just a cell-therapy play. The company is one of the leading developers of a different category of gene therapies, intended as one-time potential cures for genetic diseases. Its Lentiglobin treatment for beta thalassemia and sickle cell disease may launch as soon as 2019. There's plenty of competition in this space, but Bluebird is likely to be among the first to have a serious launch.

Higher Potential, Lower Risk?

Bluebird's multiple drug approaches give it higher potential revenue and more diversified risk than Juno

Source: Bloomberg

Bluebird would likely be substantively pricier than Juno -- its market cap was $8.5 billion before deal chatter caused its share price to jump. And there are plenty of risks associated with the company. Its results may deteriorate, and both cell and gene therapies are costly and subject to reimbursement difficulties.

But the potential for multiple drug launches over the next few years makes that a bit easier to swallow. And the fact that Celgene may be due some of the revenue from Bluebird's most promising product may compel a deal discount.

So don't cry for what might have been with Celgene; smile for what might still be with somebody else. 

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

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