Bluebird Bio CEO talks business spinoff after a 47% loss in 2020

Bluebird Bio CEO talks business spinoff after a 47% loss in 2020
Written by:
Jayson Derrick
January 12, 2021
  • Shares of Bluebird Bio lost nearly 50% in 2020.
  • The biopharma company said it will spin itself in to two seperate entities.
  • One company will focus on treating genetic diseases, another cancer.

Bluebird Bio, Inc. (NASDAQ: BLUE) is a gene therapy company that focuses on treatments for severe genetic diseases and cancer. 

Early investors that got in near the $25 level as part of Bluebird’s 2013 IPO saw their holdings increase in value nearly eight-fold by 2015 only to give up the vast majority of the gains by 2016. Shares then went on to trade north of $230 in 2018 and then slowly fell back.

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During 2020 shares lost 47% to trade near $50. On Monday, the company announced it will separate itself into two separate entities and acknowledged that the past is certainly not “the best way to head into the future.”

Spin off details

Bluebird plans on spinning off its cancer-drug business into a completely separate and independent publicly-traded company, The Wall Street Journal reported Monday morning. This would give management the ability to better focus on its core rare disease business.

Bluebird’s CEO Nick Leschly will lead the cancer-focused entity while the company’s President of Severe Genetic Diseases Andrew Obenshain will assume the CEO title of the remaining business.

“We built this powerful product engine, and the question is: ‘What is the best way to think about the next five to 10 years?’ “ Leschly told WSJ.

Spin off’s are quite common on Wall Street and companies of all shapes and sizes partake in the practice. In 2020, International Business Machines Corp. (NYSE: IBM) said it will spin off its IT infrastructure business.

Rough few years

Bluebird’s stock weakness over the years can be attributed to the company’s failure in leveraging its scientific success into commercial success, according to WSJ. The company remains in the red and posted a loss of $418.8 million in the first nine months of 2020. This brings the company’s accumulated net deficit during its nearly three-decade-long history to $2.7 billion.

After years of setbacks and disappointments, a change in strategy is warranted. Perhaps it can be as simple as splitting into two entities.

“You don’t build an oncology company by hiring people who are experts in severe genetic disease, nor do you do vice versa,” Mr. Leschly said. “A lot of this comes down to…priorities and focus.”

Casual observers might not fully understand that there are major differences between treating cancer and rare genetic diseases. Behind the scenes, the paperwork and regulatory backdrop are also far from uniform. In fact, there are major differences in terms of conducting clinical trials, interacting with lawmakers, and manufacturing therapies.

Leschly said that he resisted splitting into two entities for some time. But, if done properly the two companies could each become stronger apart than together.

The company didn’t detail financial aspects of the spin-off but both entities will be left with enough cash to succeed and generate value for investors. The transaction is expected to close in the fourth quarter of 2021.