Buy the Dip in BLUE

The action in bluebird bio (BLUE) over the last month has been manic to say the least. At first the trading was positive, as the stock rallied to a three-month high in mid-June on the back of impressive results from a Phase I/II study of LentiGlobin – a drug that treats those suffering from a blood disease called beta-thalassemia. But by the end of the month BLUE had given back those gains and then some.

One of the biggest culprits was Global Blood Therapeutics’ (GBT) June 27 announcement that it had received positive data from a Phase III drug trial of a treatment for sickle cell anemia. This blood disease has been a large focus of many biotechs in recent years, and gene editing companies are getting closer to FDA approvals. However, the news from GBT sent its competitors’ stocks lower, and that included BLUE, which fell nearly 5% on the day of the announcement.

The selling in BLUE wasn’t surprising in the short term, but it’s important to keep in mind that GBT’s drug still has a long way to go before being approved. Plus, it is possible for both companies to have blockbuster treatments for sickle cell anemia.

Patience is Key

The biggest issue most investors have with small-cap biotechs is that they take great patience. In order to log big gains, you have to get in early – and by early I mean years and years before FDA approval even becomes a possibility.

That’s where we are with BLUE right now, as it tests its 2018 lows while investors wait for more positive news regarding its pipeline and also deal with concerns about GBT’s drug. The next few months will likely be similar – highly dependent on pipeline- and competitor-related news.

In the meantime, we can use short-term pullbacks like the ones we’re experiencing now as buying opportunities. As a leader in CAR-T therapies, I believe BLUE will see great success in the future with at least one of the potential blockbusters currently in its pipeline.

As long as you’re willing to weather the ups and downs that are customary to junior biotechs, I am confident you’ll be rewarded over the long term.

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