Movers and Shakers: The Week so Far

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bluebird

The biotech space rarely fails to disappoint from a volatility perspective, and this week has been no different. Here are a couple of the week’s biggest movers – bluebird and Global Blood Therapeutics – with a look at what’s driving the action in each.

Global Blood Therapeutics, Inc. (NASDAQ:GBT)

First up, Global Blood Therapeutics. The company is developing GBT440, its lead pipeline candidate for sickle cell anemia (SCA). SCA is a genetic disorder that results in the production of what are called HbS, or sickle hemoglobin. Hemoglobin is essential for carrying oxygen in the blood stream, but HbS, when deoxygenated (i.e. has no oxygen molecules attached) can “sickle”, which basically means they become rigid and change shape. GBT440 is designed to help hemoglobin maintain its oxygenated state, meaning it (theoretically) should prevent sickling.

The drug is in an ongoing phase I/II, and Global reported data from this trial late Sunday evening, followed by a presentation American Society of Hematology (ASH) Annual Meeting and Exposition yesterday morning. On the face of things, the data looked positive. Primary end point is a reduction in median sickle count, and across two doses (500 mg and 700 mg) median sickle count decreased. Despite this, however, GBT is down 25% pre session today.

So why the decline? Well, its all about variability. There lower dose caused a higher reduction in sickle count than the higher dose (56% versus 46%), and the reduction is not as high as we saw in the initial phase I. Markets seem concerned that this variability suggests unreliability. One think to keep in mind here, however, is that the trial is only very small (12 patients). The first trial was half the size. With such small sample sizes, there is always going to be inconsistency of results. Just because the two doses performed inverse to expectation at this trial size doesn’t mean we wont get some a more as-expected performance in a larger trial. Additionally, the data only represents results 30 days into treatment. The trial is expected to go on far longer than this, and this could also smoothen out the data. If either of these scenarios come in to play, the current decline could be an oversell and, in turn, an opportunity for discount.

bluebird bio, Inc. (NASDAQ:BLUE)

Staying in very much the same arena, we move on to bluebird. The company also presented data from its lead blood disease candidate at the same conference as GBT. This time, however, things were a lot more straightforward. The drug in question is LentiGlobin BB305 – a lentiviral vector with an initial target indication of beta thalassemia. This disease is similar to SCD, in that it impacts the ability of hemoglobin to transport oxygen to vital organs around the body.

The company closed out last week at a little over $83 a share, having traded pretty much flat for the last few months. At Monday’s close, however, you could pick up stock for just $52 a share – a close to 40% decline across the session. Why? Because bluebird reported it is being forced to redesign the ongoing BB305 trial, as the drug is not performing as expected. Specifically, it is not having the desired effect in severe form patients, and is producing a different response from one patient to the other in less severe form patients. We are yet to learn exactly how the company plans to alter the trial to accommodate this scenario, but regardless of its actions, a reshuffle will lead to delays at best, failure at worst.

bluebird had a great start to the year, primarily based on expectations of BB305 hitting markets at blockbuster pace. Now, however, it looks as though the drug has a limited market potential (if it can only treat non severe cases) and may not even make it to market at all if the company cannot demonstrate consistent efficacy across a decent size patient population.

While the decline in GBT looks to be a potential discount opportunity, the decline in bluebird could easily continue as we head into the middle of the week. Look for more info on the redesigned trial as a potential reversal catalyst, but don’t expect too much upside even on the reshuffle.

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