Markets

Here's Why Shares of bluebird bio Slumped Today

What happened

Shares of bluebird bio (NASDAQ: BLUE) closed with a 9.5% drop on Wednesday, having been down as much as 10.3%, on no apparent news.

So what

The biotech has been flying high, up 55% year to date through yesterday, buoyed by an upcoming EU approval for Zynteglo, its gene therapy for the treatment of transfusion-dependent beta-thalassemia that gained a positive opinion from the European Medicines Agency's Committee for Medicinal Products for Human Use. An OK from the European Commission should come in the next couple of months.

At that point, it's anyone's guess how high sales could go, which could explain today's apparent anxiety-selling at these inflated stock prices. A few countries in Europe don't have price controls, but the prices for treatments in many European countries are highly regulated. How much Bluebird will be able to charge for Zynteglo, which is a one-time treatment, is unknown at this point.

Arguably, it should be easier for Bluebird to fetch a higher price in countries with one-payer systems, since, as the name implies, transfusion-dependent beta-thalassemia patients need to get regular transfusions. One-payer systems can factor that cost savings from not having to give future transfusions into the price they're willing to pay.

That argument will be a little harder in multi-payer countries, such as the U.S., where Zynteglo should be approved in 2021, since an insurer paying for the one-time treatment can't be guaranteed the savings if the patient moves to another insurer.

Technician helping patient with an infusion

Image source: Getty Images.

Now what

Given the lack of news, today could be a good opportunity for long-term investors to pick up shares at a discount. While there's some risk of not knowing exactly how well the launch of Zynteglo will end up going, Bluebird has additional options to bring in revenue by expanding Zynteglo into sickle cell disease and a very promising CAR-T immuno-oncology program.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends bluebird bio. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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