bluebird bio, Inc. (NASDAQ:BLUE) Q4 2023 Earnings Call Transcript March 26, 2024
bluebird bio, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and welcome to bluebird bio Fourth Quarter and 2023 Annual Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Courtney O’Leary, Investor Relations. Please go ahead.
Courtney O’Leary: Good morning, everyone and thank you for joining our fourth quarter and 2023 annual results call today. My name is Courtney O’Leary, Director of Investor Relations at bluebird bio. Before we begin, let me review our Safe Harbor statement. Today’s discussion contains statements that are forward-looking under the Private Securities Litigation Reform Act of 1995, including expectations regarding our future financial results and financial position, in addition to statements of the company’s plans, expectations or intentions regarding regulatory progress, commercialization plans and business operations. Such statements are based on current expectations and assumptions that are subject to risks and uncertainties and involve a number of risk factors that could cause actual results to differ materially from projected results.
A description of these risks is contained in our filings with the SEC, which are available on the Investor Relations section of our website, www.bluebirdbio.com. On today’s call, Andrew Obenshain, bluebird bio’s CEO, will provide a general corporate update. And then Tom Klima, Chief Commercial and Operating Officer, will discuss progress on the commercial launches of LYFGENIA, ZYNTEGLO and SKYSONA. And finally, Chris Krawtschuk, Chief Financial Officer will provide a financial update before opening the call up for Q&A. With that, I will turn it over to Andrew.
Andrew Obenshain: Thanks, Courtney and thank you, everyone, for joining our call this morning as we provide an update on our fourth quarter and 2023 annual results and discuss our strategic outlook and planned milestones for 2024. Earlier this morning, we put out an 8-K announcing that we will be restating financial information for 2022 and for the first three quarters of 2023, and that we’ve submitted an extension on our 10-K filing. We now anticipate filing the 10-K inclusive of that restatement no later than April 16. Importantly, the restatement does not impact our cash position or revenue. Chris will discuss this in greater detail later in the call. 2023 was a year of significant progress for bluebird. We established ourselves as a commercial gene therapy leader, with a validated commercial strategy that brought both ZYNTEGLO and SKYSONA to patients across the U.S. Our recent commercial progress for LYFGENIA builds on that foundation.
With the FDA approval of LYFGENIA for sickle cell disease last December, bluebird is currently the only commercial gene therapy company with three FDA-approved products. Since then, our commercial team has hit the ground running to position ourselves for a strong LYFGENIA launch. We have talked before about the benefits for our significant commercial head start with ZYNTEGLO. And today, we are seeing the fruits of that labor translate into real momentum for LYFGENIA. We have activated 62 qualified treatment centers and have signed our first outcome space agreement for Medicaid, extending access to LYFGENIA to this critical patient population. And 2024 is off to a fast start, with nine patient starts already this year. Tom will dive deeper into our commercial progress momentarily.
Last week, we also announced that we entered into a five year term loan with Hercules Capital, for up to $175 million. This transaction provides bluebird with an infusion of capital, is expected to extend our cash runway beyond the next 24 months. Last August, on our Q2 earnings call, we set out a five year vision for bluebird as a standalone commercial gene therapy company. We outlined our near-term path to profitability and are expecting additional growth and scale over the next five years. This funding forwards that vision to capitalize on the multibillion dollar opportunity in front of us in the U.S. I will now hand the call over to Tom to highlight the significant progress happening in our commercial launches.
Tom Klima : Thanks, Andrew and good morning, everyone. As Andrew noted, 2023 was a pivotal year for bluebird, in which we built our commercial foundation with ZYNTEGLO, beta thalassemia and SKYSONA for Cerebral Adrenoleukodystrophy. Today, we are capitalizing on the head start to accelerate the launch of LYFGENIA for sickle cell disease. As a reminder, our launches are focused on three core elements for success. First, establishing a robust network of qualified treatment centers or QTCs. These are transplant centers with significant experience in cell and gene therapy. As Andrew mentioned, today, we have 62 activated QTCs, unparalleled compared to others in the field. Second, ensuring the value of our therapies are recognized and that patients have timely, equitable access.
In a moment, I’ll dive deeper into our progress on access and reimbursement. And lastly, optimizing the patient and provider experience. Gene therapy is a high touch business where transparency, collaboration and understanding the needs of patients, families and providers is paramount. Our deep understanding of the gene therapy process, our dedicated focus and our experience over the last 18 months allow us to be a strong partner to our activated QTCs, as we help them bring life-changing therapies to their patients. Three months into the LYFGENIA launch, patient demand is strong. I am very excited to share today that we expect our first patient start will be scheduled imminently, and we are extremely encouraged by the number of enrollments and patients preparing for treatment from multiple treatment centers across our QTC network.
We anticipate starts for LYFGENIA to grow quarter-over-quarter, with the majority occurring in the second half of the year as momentum builds. We anticipate that the first revenues for LYFGENIA will be reported in Q3. Moving to ZYNTEGLO, we continue to see strong linear growth with seven patient starts since the beginning of 2024, in addition to the 20 patient starts completed for ZYNTEGLO in 2023. Additionally, we have completed two patient starts for SKYSONA since the beginning of 2024, in addition to the six patient starts completed for SKYSONA last year. And as a reminder, patient starts, which is when cell collection occurs, remains the key commercial metric to watch in the early stages of our launches as this is the value-creating moment for the company, with revenue being recognized when the patient is infused.
For modeling purposes, you can expect that patients are infused one to two quarters following cell collection. And in our experience, once the patient goes through the cell collection, they continue on the treatment journey. To-date, every patient who has started the process has either completed the process or remains in the process. Going forward, we plan to provide quarterly updates on patient starts for each of our therapies as we work towards the 85 to 105 patient starts we guided to in 2024. Turning to access and reimbursement, gene therapies are onetime transformative treatments and bring tremendous value to the healthcare system and to patients. For years, bluebird has led the way in articulating the value of gene therapies to payers and charting paths to access for patients.
We continue to see timely access for ZYNTEGLO and SKYSONA with 0 ultimate denials for either therapy across both Medicaid and commercial payers. Payers are recognizing the value of these therapies in the high burden of disease. And today, we are seeing the same early success with LYFGENIA, where our goal is timely, equitable access for patients. And our approach is working. We have designed outcomes-based agreements that are unique to LYFGENIA, offering payers meaningful risk-sharing tied to [ VOE-related hospitalizations, with patients typically followed for three years. In addition to a commercial offering, we’ve designed an offering specifically for Medicaid that addresses the need for predictability and operational ease that is essential for states grappling with resource constraints.
Earlier this month, we announced that bluebird signed its first outcomes-based agreement for LYFGENIA with Michigan’s Medicaid program, demonstrating support from government payers for these types of innovative arrangements. We’ve also signed a total of four commercial outcomes-based agreements for LYFGENIA, covering more than 200 million lives. In three short months, we’ve already seen close to 90% of coverage policies cover LYFGENIA at parity, including policies from major national insurers, such as Aetna, Anthem and Cigna. We continue to be focused on access for Medicaid patients in 2024, and discussions are ongoing with more than 15 Medicaid agencies, representing 80% of the individuals with sickle cell disease in the U.S. We are also actively engaged with CMMI on its cell and gene therapy access demonstration that is slated to begin in 2025, which could serve as a bandwidth extender for states who do not have the ability to implement outcomes-based agreements on their own.
Moving to our QTC network, one of the most significant advantages of our commercial head start has been our ability to build our synergistic QTC network. We now have 62 activated centers, the largest network of qualified treatment centers for hemoglobinopathies, 49 of which are already ready to receive referrals for LYFGENIA today. This means that approximately 95% of people living with sickle cell disease are within 200 miles or less of a bluebird QTC. We anticipate additional QTC expansion across our portfolio in 2024. We also recently signed agreements with QTCs in geographies with important proximity to sickle cell patients, where we are meeting patients where they are, in Georgia, across Florida and throughout the New York Metropolitan area.
Additionally five centers have also been activated to administer SKYSONA for patients with CALD. We were able to quickly activate our LYFGENIA QTC due to both bluebird [ph] experience of setting up these centers for ZYNTEGLO and the strong relationships we have built with these centers throughout 2023. From onboarding through infusion, our QTCs are comfortable with our process and have grown to expect the transparency and the partnership that bluebird brings to the table. To recap, ZYNTEGLO and SKYSONA launches continue to progress as planned, and we anticipate strong linear growth from ZYNTEGLO in 2024. We’ve made incredible early progress in our LYFGENIA launch, building on our validated commercial platform. We are seeing clear demand from patients and physicians, payers are recognizing the value of LYFGENIA in providing access and our QTC network is fully ready to help patients start their journey with a curative therapy.
And now I’d like to turn the call over to Chris.
Chris Krawtschuk: Thanks, Tom, and good morning, everyone. Before discussing the details of the restatement and the filing extension we announced this morning, I want to highlight the financial results we reported in our press release. In the fourth quarter, we reported $7.8 million in total revenue, primarily driven from product revenue from ZYNTEGLO and SKYSONA. As a reminder, we recognize revenue upon infusion of the drug product. Additional drug product for several patients were delivered at the end of December and infused in January. So this revenue will be recognized in the first quarter of 2024. For the full year 2023, we reported $29.5 million in net revenue, with $16.7 million of revenue attributable to ZYNTEGLO and $12.4 million of revenue attributable to SKYSONA, with cumulative gross to net discounts across the portfolio of 2 products of approximately 19%.
In 2024, we anticipate gross to net discounts in the range of 20% to 25%, with fluctuations based on product and payer mix as well as utilization of our outcomes-based agreements. Going forward, bluebird plans to provide revenue by product on a quarterly basis, and as Tom shared earlier, we expect the first LYFGENIA patient infusion and revenue recognition in the third quarter of 2024. We ended the year with cash and cash equivalents, marketable securities and restricted cash of approximately $275 million, which includes $53 million of restricted cash. We’re very pleased to announce that we entered into the five year term loan with Hercules Capital for $175 million. This financing provides an infusion of non-diluted capital for bluebird, helping fuel the launch of LYFGENIA and deliver on our mission as a company.
The loan provides for up to $175 million in the aggregate, and it’s available in four tranches. The first tranche in the amount of $75 million was drawn on closing. We may draw additional two tranches over the next 18 months in aggregate, of an amount up to $50 million, and this is subject to the achievement of commercial milestones tied to LYFGENIA patient starts and gross profit. The fourth tranche of up to $50 million may be available at the sole discretion of Hercules. Importantly, and to reiterate Andrew’s comments, based on our launch estimates and our current business plans and assuming the first three launches are executed, the transaction is expected to extend our cash runway beyond the next 24 months and puts us in a durable capital position as we approach profitability.
Lastly, this morning, we announced we will restate financial information for the full year of 2022 and for the first three quarters of both 2022 and 2023. The restatement relates to the application of our accounting policies for contracts with our contract manufacturing organizations and suppliers, which did not consistently combine lease and non-lease components, and was discovered by our internal finance team during the preparation of our annual financial statements. For 2022, we estimate the understatement of lease assets and lease liabilities of approximately $100 million to $200 million for the full year, as well as an estimated understatement of lease assets and liabilities of approximately $30 million to $125 million for the first 3 quarters of 2022 and 2023.
While we’re still working through the exact details, the lease will be reclassified as finance leases as a result, and we anticipate the increase of noncash interest expense on our P&L. The restatement is not expected to have any impact on our cash position or revenue. In consideration of the time we will take to complete the restatement, we have filed for an extension of our 10-K, and we anticipate that our 2023 10-K inclusive of the restated periods will be filed April 16. And with that, let me turn it back over to Andrew.
Andrew Obenshain: Thank you, Chris. And to summarize, bluebird is deploying a validated commercial gene therapy strategy with three FDA-approved therapies taking place in 2024, delivering on our promise to patients and their families. We expect 2024 to be a transformative year for our company, and we look forward to providing more updates in the upcoming quarters as our commercial launch of LYFGENIA progresses. And with that, I’d like to open it up for questions. Operator?
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