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Why bluebird bio, Inc. Stock Gained 25.3% in July

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What: Shares of bluebird bio, Inc. (NASDAQ: BLUE) a clinical-stage biotechnology company developing gene therapies for genetic diseases and T cell-based cancer treatments, rose 25.3% in July, according to data from S&P Global Market Intelligence. The company presented progress for its gene editing techniques and announced a deal to secure production of its leading candidates. While these are important developments, the FDA's quick lift of a clinical hold for Juno Therapeutics (NASDAQ: JUNO), its peer in developing T cell therapies, probably gave Bluebird's wings the most lift last month.

So what: Despite July's gains, Bluebird's shares are still trading about 67.5% lower than they were a year ago. For a biotech with potentially transformative therapies in development, but perhaps years from commercializing its first product, price swings of this magnitude without any significant news aren't unusual.

The FDA's recent stop and start of Juno's lead program showed the Agency's desire to hasten the pace of T cell-based cancer therapy development. Bluebird has one of these in early clinical stages, in partnership with Celgene, and several more in preclinical stages.

While it's nice to see Bluebird's stock rise for any reason, the vast majority of the company's market cap of about $2.0 billion is based on its non-cancer targeting gene therapies, which use viruses to insert sections of correct DNA into patients' harvested stem cells.

The new DNA sections should lead to production of a specific, functional protein, essentially providing "cure" with a single treatment. LentiGlobin is a potential cure for diseases caused by a faulty hemoglobin gene, namely beta-thalassemia, and sickle-cell. Its cousin LentiD inserts a gene that leads to the production of a viable adrenoleukodystrophy protein, the culprit in a debilitating disease of the same name that affects about one in 21,000 newborn males. 

These three diseases can be "cured" without all of the fancy technology by using a donor's stem cells, but the risk of graft failure, and often lethal graft-vs-host disease, limits the procedure to the most severely affected patients.

Over the years, some guesswork has been taken out of predicting which donor's cells are more likely to go berserk in a specific patient, and which might succeed (think strangers, or siblings). Bluebird's data thus far suggests your own cells blend right in, but there isn't very much of it.

I'm not sure if I've ever seen a stock whipped around by so few patients. Last year, Bluebird shot up to a market cap above $6 billion when the first few patients infused with LentiGlobin cells started showing signs of improvement consistent with tremendously successful donor stem cell transplants.

Last December, the improvements began looking merely like successful stem cell transplants. Bluebird's stock plummeted after the company revealed that a few patients needed blood transfusions.

Now what: What's most important now is a consistent safety record, and the company might get a chance to exhibit one. Childhood cerebral adrenoleukodystrophy is an incredibly debilitating disease without any viable treatment options, and LentiD looks like a winner in this very small population.

The truth is, we don't know how well stem cell transplants work on the broader beta-thalassemia and sickle cell populations. They're debilitating diseases, but not necessarily fatal. Donor stem cell transplants for non-cancer diseases generally have a survival rate of just 70%-90% if the donor is a matched sibling, and 36%-65% if the donor is unrelated. Side effects from frequent blood transfusions are painful, but not nearly as dangerous.

Worldwide, an estimated 288,000 people have beta-thalassemia and roughly 25 million have sickle cell. Currently available treatments for these diseases wouldn't stand a chance against LentiGlobin if it were an available option. When Bluebird presents more data at a scientific conference this December, expect the stock to get whipped around again -- hopefully in the right direction for investors.

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Cory Renauer has no position in any stocks mentioned. You can follow Cory on Twitter

, or connect with him on LinkedIn for more healthcare industry insight. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has the following options: short October 2016 $95 puts on Celgene. The Motley Fool recommends Bluebird Bio and Juno Therapeutics. Try any of our Foolish newsletter services free for 30 days.

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