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Investors flocked to bluebird bio (NASDAQ: BLUE) last month, following two developments. Bluebird's management announced it could file three novel gene therapies for approval by the Food and Drug Administration by the end of next year, and Celgene (NASDAQ: CELG) acquired Juno Therapeutics (NASDAQ: JUNO) for $9 billion.
The potential to either begin generating significant revenue soon or be acquired by a larger company sent Bluebird's shares skyrocketing 15% in January, according to S&P Global Market Intelligence.
At the J.P. Morgan Healthcare Conference in January, Bluebird's management unveiled plans that include advancing three drugs to the FDA over the next year: bb2121, a multiple myeloma CAR-T that it's developing with Celgene; lentiglobin, a therapy for beta thalassemia; and lenti-D, a treatment for cerebral adrenoleukodystrophy.
The three drugs represent a significant commercial opportunity that could prompt a suitor such as Celgene to approach the company about a buyout.
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The peak sales potential of bb2121 alone could be in the billions of dollars. Celgene is already the market-leading maker of drugs for multiple myeloma; its Revlimid, a first-line therapy, and Pomalyst, a third-line therapy, generate more than $10 billion per year in sales. In early-stage studies, 94% of patients who were given bb2121 responded. If pivotal studies pan out similarly, it could become the standard in fourth-line treatment.
Currently, Celgene and Bluebird will share profit on bb2121 sales in the United States, but given the size of the market opportunity, it wouldn't surprise me if Celgene considers making an offer to gain complete control over Bluebird.
However, even if no one comes knocking on Bluebird's door about a deal, it could still be a winning stock for investors. After all, it has one of the most advanced gene therapy pipelines in the industry, and that could justify a valuation that's north of its current $9.75 billion market cap.
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Todd Campbell owns shares of Celgene. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Bluebird Bio and Celgene. The Motley Fool has a disclosure policy.