Is $1.8 Million for bluebird bio's New Gene Therapy Ridiculous?

On June 3, European regulators gave a green light to bluebird bio's (NASDAQ: BLUE) beta-thalassemia therapy, Zynteglo, and on Friday, management revealed plans to charge $1.8 million for the revolutionary new treatment. Its million-plus price sounds exorbitant, but it may not be as ridiculous as it seems. Here's how Zynteglo may transform the treatment of this genetic disorder.

What's beta-thalassemia?

It's a potentially fatal disease. Beta-thalassemia patients can't produce adequate levels of a protein called beta-globin because of a genetic mutation. Beta-globin is a component of hemoglobin, an iron-rich protein in red blood cells responsible for transporting oxygen from the lungs to the body's tissues. In severe cases of beta-thalassemia, patients require red blood cell transfusions every two to five weeks in order to survive.

These transfusions can help patients avoid severe anemia that can lead to organ damage, but they're expensive, and over time, they can result in iron overload that can be life-threatening.

A game-changing new approach

A lifetime of blood transfusions may no longer be necessary for many following the European approval of bluebird bio's Zynteglo. A gene therapy, Zynteglo inserts a functional copy of a modified form of the beta-globin gene (βA-T87Q-globin gene) into a patient's own blood stem cells.

The new gene allows patients to produce their own beta-globin, potentially eliminating the need for blood transfusions.

In bluebird bio's HGB-205 study, three out of four patients without the β0/β0 genotype of this disease achieved transfusion independence lasting at least 12 months following one dose of Zynteglo. In its Northstar study, eight of 10 patients lacking the β0/β0 genotype were transfusion-independent for 21 to 56 months post-treatment.

Those results were good enough to secure European approval for use in transfusion-dependent patients over the age of 12 who don't have the β0/β0 genotype, but trials could expand use to people with that genotype in the future.

Is $1.8 million ridiculous?

Gene therapies like Zynteglo that restore protein expression and remove the need for chronic treatment could actually save healthcare systems a lot of money over time, despite their million-dollar price tags.

Earlier this year, bluebird bio presented an analysis demonstrating Zynteglo's ability to improve quality of life and extend life expectancy gives it an intrinsic value of $2.1 million. At the time, the company pledged to price it below that figure and to entertain novel payment terms, including deals that spread payments out over several years.

It has stuck to its pledge. Zynteglo's $1.8 million price can be paid in equal installments over five years, and if the drug stops working before then, payers won't have to keep making their payments. This value-based approach makes a lot of sense. Payers only pay if Zynteglo works; and if it works, then payers could save hundreds of thousands of dollars per year from year five on because it can cost between $300,000 to $500,000 per year to treat people with rare diseases such as beta-thalassemia, without including costs related to complications.

What to watch next

Zynteglo's European approval only covers its use in a few thousand people, but the commercial opportunity could be bigger if studies evaluating it in patients with the β0/β0 genotype pan out and the Food and Drug Administration eventually signs off on its use in the United States.

A filing for U.S. approval is expected soon, and if the company gets an OK, that would boost its addressable market by another 1,400 eligible patients. Meanwhile, trials evaluating Zynteglo in patients with the β0/β0 genotype are underway, and new data suggests that it may be able to help some of those patients, too. In an update to its phase 1/2 trial data, bluebird bio says three of eight patients with the β0/β0 genotype achieved transfusion independence for a median 16.4 months. Also, one participant in its ongoing phase 3 study was evaluable for transfusion independence lasting over 12 months, and that person had maintained transfusion independence at the 16-month mark. Additionally, five more patients had stopped receiving transfusions for at least three months.

If the data ends up showing value in all beta-thalassemia patients and the FDA approves it, then Zynteglo could be a blockbuster drug that delivers a win for patients, the company, and healthcare payers over time.

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Todd Campbell owns shares of Bluebird Bio. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Bluebird Bio. The Motley Fool has a disclosure policy.