Bluebird bio cuts 25% of staff amid financial struggles

In a bid to address ongoing financial difficulties, bluebird bio announced a major restructuring plan that includes reducing its workforce by approximately 25%. This decision follows the company's delayed annual securities filing in which it warned of insufficient financial resources to sustain operations for the next year. The restructuring aims to cut cash operating expenses by about 20% and achieve break-even on quarterly cash flows in the second half of 2025.

The layoffs will affect nearly 100 employees out of a total of 375 full-time staff members as of the end of June. Most of the job cuts will impact the research and development (R&D) and general administration departments. Bluebird's Chief Financial Officer, James Sterling, emphasized that the company is refocusing its expenditure on commercial activities to drive future growth.

CEO Andrew Obenshain described the decision to reduce the workforce as a result of a thorough review of the company's needs and capabilities. The company's financial predicament has been a recurring issue, highlighted by its ongoing warnings about its ability to continue operations. As of the end of June, bluebird had a cash balance of about $193 million, including $49 million in restricted cash. Sterling reaffirmed that this cash reserve is expected to fund operations into the second quarter of 2025.

Founded in 1992, bluebird bio has concentrated on developing gene therapies for rare diseases. Despite launching three gene therapies—Lyfgenia, Skysona, and Zynteglo—the company has never achieved profitability, excluding the income from selling FDA priority review vouchers. By the end of 2023, the company's accumulated deficit had reached $4.3 billion.

The commercial uptake of bluebird's gene therapies has been slower than anticipated. In its second-quarter report in August, the company revised its 2024 patient start expectations to about 85, the lower end of its previous guidance. As of now, bluebird has initiated treatment for 41 patients, up from 27 in mid-August, and expects around 40 new patient starts in the last quarter of the year.

Lyfgenia, approved by the FDA in December 2023 for sickle cell disease, has not yet shown a commercial advantage over competing products like Vertex and CRISPR Therapeutics' Casgevy, despite bluebird's extensive experience in gene therapies.

For bluebird to reach its cash flow break-even target, it assumes it will need to achieve around 40 drug product deliveries per quarter. The company plans to double its capacity for Lyfgenia in 2026, expecting a ramp-up similar to its beta thalassemia gene therapy Zynteglo. According to bluebird’s estimates, around 20,000 sickle cell patients in the U.S. could be eligible for gene therapy, compared to about 1,000 patients for Zynteglo.

Revenue is recorded upon product delivery rather than when patients start the treatment process, which introduces a delay of approximately four to five months. This time lag emphasizes the challenge of converting patient starts into revenue, as highlighted by Chief Commercial and Operating Officer Tom Klima.

Despite cost reductions and potential sales increases, bluebird may still fall short of breaking even. The company is also seeking additional funds through other means. Sterling noted the amended loan agreement with Hercules Capital, which allows bluebird to draw $25 million if it secures over $75 million in gross cash proceeds from other financing transactions by December 20, 2024. Further tranches of $25 million are available if certain financial milestones are achieved by mid-2025.

Sterling clarified that bluebird might not necessarily need the full amount available from Hercules Capital to reach its financial targets. The company continues to face challenges, reflecting broader struggles in the gene therapy sector. In 2022, bluebird reduced its workforce by 30% and exited the European market.

Obenshain remains optimistic, believing that the company is making progress toward achieving financial sustainability despite the ongoing challenges.