Why bluebird bio Inc Continued Its March Higher Again Today

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What happened

Shares of bluebird bio (NASDAQ: BLUE) continued their seemingly unstoppable march higher this week, jumping another 10.8% today as of 2:58 p.m. EDT after two analysts increased their price targets on the biotech. All told, Bluebird is up a whopping 27% for the week -- and it's only Thursday.

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This occurred after Gilead Sciences (NASDAQ: GILD) announced the acquisition of fellow CAR-T biotech Kite Pharma (NASDAQ: KITE), driving acquisition speculation on Monday. The Food and Drug Administration (FDA) also approved Novartis' (NYSE: NVS) Kymriah yesterday, suggesting Bluebird might have an easy time getting its own CAR-T treatment, bb2121, approved.

So what

BMO analyst Matthew Luchini raised his price target to $134, up from $108, based on an increased likelihood of approval of Bluebird's CAR-T bb2121, because of the approval of Kymriah. The price target increase also included an increase in his prediction for the cost of the bb2121 treatment based on Kymriah's $475,000 price tag. Wedbush analyst David Nierengarten also raised his price target from $121 to $135, noting that Bluebird gets a small royalty on Kymriah's sales.

Now what

The ironic thing here is that Bluebird didn't have to release any news to get the pump in stock price. As sometimes happens in the industry, investors are assigning a higher valuation to the company based on the results of related companies. Valuation is based on risk and reward, so if the perceived risk is lower -- more likely to get its drugs approved -- or the reward is bigger -- more likely to get a buyout or an increase in peak sales -- then the valuation will go up.

But the ultimate value for Bluebird will be determined by the clinical and regulatory success of bb2121 and Bluebird's gene therapy treatment LentiGlobin. The latter will have data at the American Society of Hematology meeting in December, which investors should be focused on... unless Friday brings us more news, of course.

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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 and Gilead Sciences. The Motley Fool has a disclosure policy.