Bluebird shares sink as analysts puzzle out $1.8M sticker shock and an unexpected delay
Bluebird bio $BLUE has unveiled its price for the newly approved gene therapy Zynteglo (LentiGlobin), which came as a big surprise. And it wasn’t the only unexpected twist in today’s story.
With some analysts betting on a $900,000 price for the β-thalassemia treatment in Europe, where regulators provided a conditional early OK, bluebird CEO Nick Leschly said Friday morning that the patients who are successfully treated with their drug over 5 years will be charged twice that — $1.8 million — on the continent. That makes this drug the second most expensive therapy on the planet, just behind Novartis’ newly approved Zolgensma at $2.1 million, with analysts still waiting to see what kind of premium can be had in the US.
Like Novartis, bluebird will be setting it up as an installment plan, with the charges spread out over 5 years as physicians evaluate whether it’s working or not. The company will charge 315,000 euros a year. If it works, the annual payments will continue, Leschly said in a call today, “if not, they stop. It’s not rocket science; it just makes sense.”
These new, higher, numbers will spur analysts to sit down and crunch the numbers again for this drug. SVB Leerink estimated peak sales of $800 million for the first indication, with sickle cell disease taking that into blockbuster territory.
But investors didn’t warm up to the presentation for the biotech, which has a market cap of $6.5 billion. Bluebird shares slid 4.5% in early trading Friday. By early afternoon the stock was more than 5% in the red.
Leschly says bluebird has established a clear “intrinsic” value of $2.1 million — delivering 22 QALYs, or quality-adjusted life years — for the most successful cases, noting that their price reflects a 15% discount on that figure. But the biotech also looked at providing a one-time treatment that could deliver a lifetime of value — without actually proving just how long these therapies can be effective. And they propose being fully paid in 5 years, leaving payers to consider what happens if it fails past that point.
Another point: This is a complicated procedure, which adds costs on top of the treatment expense.
Then, in the early afternoon, Cowen analyst Yaron Werber got into the act, noting his surprise that bluebird is delaying the launch in order to make some last minute changes to the manufacturing process, which adds an extra element of risk for the biotech.
(T)he key unexpected news is that EMA has requested amendments to the final drug products specifications and to the manufacturing parameters. Hence this delays the launch and would remove any sales in FY19 to early ’20. The good news is that it would enable blue to onboard the qualified treatment centers and help further prep for the launch. However, unquestionably this request adds an element of surprise and would require blue to make a few mnfg process changes ahead of launch which would also add some new risk.
Leschly carefully detailed how the company came up with its price and payment model, noting that the system is geared to covering the cost of care delivered over a longterm basis, rather than a potential one-time event.
In making the case for the drug, bluebird’s CEO used a health economics case, evaluating the gains in life expectancy and the quality of life measures. Leschly also specifically excluded the savings from the therapy Zynteglo replaces.
“In principle, I actually think this is progress,” says Peter Bach from the Memorial Sloan Kettering Cancer Center, “I actually think it’s a good trend.”
If they really want to follow through with a rigorous health economics case, says Bach, they should publish their numbers so payers could take a careful look at how they actually stack up. Also, if they wanted to be consistent, he adds, the company could start with a price that made sense based on the data at hand, and then adjust it as they find out more about how it works on a longterm basis.
“In the old days you could come to market when you proved drugs work with durability. Now they come with unsure durability, but they still want to charge at the upper end.” And they’re getting the full payment for a lifetime benefit in the first 5 years, shifting the risk onto patients and payers.
When it works, bluebird bio’s gene therapy for β-thalassemia has been shown to keep patients transfusion free for up to 3.8 years, according to an update today at the big EHA meeting. But even some Wall Street analysts are having trouble with the price, as well as the market expectations. Piper Jaffray’s Tyler Van Buren:
(B)ased on consensus estimates, the Street is modeling that bluebird transplants thousands of patients with Zynteglo/LentiGlobin. Put simply, this is a disconnect that is impossible for us to reconcile. We also believe that the $1.8MM price tag of Zynteglo is hard to justify given the $2.1MM comp of Zolgensma, which treats children with a certain outcome of death, as opposed to a population where the majority of patients are adequately maintained on transfusions.
And this is from SVB Leerink’s Mani Foroohar:
Like any cell therapy, ‘process is the product’ for Zynteglo, and whether the ultimate commercial product will live up to the clinical data seen to date is unclear due to necessary manufacturing changes — increasing the risk to the 80% of revenue/patient at-risk under a 5-yr value based contract. More concerning is that BLUE was unable to execute on the manufacturing process development that is the critical core competency of any cell therapy franchise, perhaps raising questions on the company’s ability to hit stated timelines for many of its programs.
The devil, as always, is in the data.
Here’s the latest from bluebird $BLUE: While 8 of 10 patients with a less severe form of the disease remain transfusion-free in the Phase I/II study used for the regulatory submissions, it’s not a sure thing. And in another group of 8 patients with a β0/β0 genotype, only 3 were transfusion independent.
Those results now extend over to the Phase III trial, where 4 of 5 patients without the β0/β0 genotype are transfusion-free. One evaluable patient with the more severe form of the disease achieved independence from transfusions, and 5 patients had stopped transfusions for at least three months.
That 3.8 years of transfusion independence is critical for bluebird.
These discussions by the pioneers in the field will prove tremendously influential for the rest of the field, locking in price ranges and payment plans that — if they work — may well dictate the numbers for everyone else.