If there is one thing Bluebird Bio (BLUE) and Novavax (NVAX -2.24%) have in common, other than their belonging to the biotech industry, it is that both have seen their shares drop catastrophically in recent years. Bluebird's stock is down by 91% in the past three years, while Novavax's has declined by 97%.
The market doesn't have much faith in either company, but if they can turn things around, opportunistic investors who initiate positions now could significantly beat the market over the long run. Which of these two biotechs should aggressive, contrarian investors consider adding to their portfolios? Let's find out.
The case for Bluebird Bio
Bluebird Bio specializes in gene editing. It currently has three approved products on the market. Last year, it generated revenue of only $29.5 million, although that was much better than the $3.6 million recorded in 2022. The most promising of Bluebird's therapies is without a doubt Lyfgenia, a treatment for a rare blood disorder called sickle cell disease (SCD) that earned the nod in December.
With about 20,000 eligible patients in the U.S., Lyfgenia's target market is far greater than Bluebird's other approved medicines. It will cost $3.1 million per treatment course, so the potential is vast.
Further, Bluebird Bio doesn't seem to be having trouble getting third-party payers on board. Let's remember that the biotech exited the European market because of this precise problem: It couldn't get payers on board to cover the cost of its treatments. So far, it has signed a handful of outcome-based agreements with several payers in the U.S. Bluebird Bio has also activated 62 qualified treatment centers (QTCs) for Lyfgenia.
Complex gene editing treatments like Lyfgenia can only be administered in QTCs. The more Bluebird Bio has access to, the more patients it can treat. Lastly, Bluebird Bio has enough cash to last until 2026. It ended 2023 with $275 million in cash, and since then, it has raised $174 million through debt financing. Bluebird Bio is an innovative company. If it can grab a small slice of its target market with Lyfgenia, its stock price could soar.
The case for Novavax
Novavax is also a pretty innovative company. In the sea of biotechs seeking to develop effective COVID-19 medicines, it was one of the few to come out on top. And unlike Bluebird, Novavax has generated meaningful revenue. Last year, the company's top line came in at about $1 billion, although that was a decline from the $2 billion it reported in 2022.
Thankfully, the worst of the pandemic is in the rearview mirror. But the market for coronavirus vaccines hasn't disappeared completely. After all, the disease can still cause -- and is still causing -- hospitalizations and deaths. So, Novavax should continue recording some sales from its product. For this year, it expects revenue between $800 million and $1 billion.
Novavax is developing one other product. It is a potential combination vaccine for COVID-19 and influenza. The biotech plans to start a phase 3 study during the second half of the year, with a possible launch in 2026 if all goes well. The company ended the year with $584 million in cash and equivalents, compared to $1.3 billion as of the end of 2022.
Recently, Novavax was able to put a major risk behind it when it reached an agreement with Gavi, the Vaccine Alliance, over canceled orders of coronavirus vaccines. If the biotech can remain competitive in the COVID-19 vaccine niche, all hopes aren't lost.
The verdict
Once again, it's important to emphasize that both biotech stocks are very risky. Those who aren't comfortable with heightened volatility should stay away. With that said, of these two companies, Bluebird Bio is the slightly better option. Though Novavax's revenue and cash position look stronger, it is playing second fiddle (at best) to other companies in delivering coronavirus vaccines to patients. Its sales should continue dropping.
Meanwhile, Bluebird has proven it can develop innovative therapies in an area with incredible promise: gene editing. In my view, the company's approved products are worth more than the market gives it credit for. While Bluebird's shares recently fell due to an accounting error, it did not affect its revenue or cash position. Lastly, a potential acquirer would have much more to gain, namely a team of gene editing experts, by buying out Bluebird Bio over Novavax. One more reason why aggressive investors should opt for the former.
