After bluebird bio acknowledged troubles keeping its business operational, the gene therapy biotech is launching a restructuring that will reduce the size of its workforce by about 25%.
The overhaul, unveiled Tuesday, is designed to reduce bluebird’s cash operating expenses by about 20% and to help the company break even on quarterly cash flows in the second half of 2025.
The layoff round means that nearly 100 bluebirds will have to leave the nest based on a head count of 375 full-time employees as of the end of June.
Although cuts are being made across the board, R&D and general administration staffers will bear the brunt of the restructuring so that the company can focus its spending on commercial activities, bluebird Chief Financial Officer James Sterling said on an investor call Tuesday.
“The decision to reduce our workforce in support of a more focused set of priorities was made following a detailed review of the needs and capabilities of our organization,” bluebird CEO Andrew Obenshain said in a statement Tuesday.
The move comes shortly after bluebird, in its delayed annual securities filing, again warned that there is “substantial doubt regarding the company’s ability to continue as a going concern,” an accounting term for when a company may not have enough financial resources to continue operating for a year. The company has flagged that risk for a couple years now.
Based on a cash balance of about $193 million, including $49 million in restricted cash, as of the end of June, bluebird in August said it expects to fund its operations into the second quarter of 2025. Sterling on Tuesday confirmed that cash runway.
Since its inception in 1992, bluebird has been focused on potentially curative gene therapies for rare diseases. While the company has launched three commercial gene therapies—Lyfgenia, Skysona and Zynteglo—it has never been profitable, excluding the sale of its FDA priority review vouchers. As of the end of 2023, bluebird’s accumulated deficit had reached $4.3 billion.
Uptake of its gene therapies has so far been limited. During its second-quarter report in August, bluebird disappointed investors after narrowing its 2024 expectations to just about 85 patient starts, the lower end of its previous guidance. So far, bluebird has initiated treatment for 41 patients across its portfolio, up from 27 in mid-August. It expects about 40 new patient starts in the last three months of the year.
Lyfgenia, the sickle cell gene therapy approved by the FDA in December 2023, is not showing any commercial edge over Vertex and CRISPR Therapeutics’ rival product Casgevy despite bluebird’s experience with gene therapies.
For its cash flow break-even target, bluebird assumes it can achieve about 40 drug product deliveries per quarter. After that, the company has plans to double capacity for Lyfgenia in 2026 in anticipation of a similar launch ramp-up as the beta thalassemia gene therapy Zynteglo, bluebird’s chief commercial and operating officer Tom Klima said on Tuesday’s call.
By bluebird’s estimate, about 20,000 sickle cell patients in the U.S. could be eligible for gene therapy, versus about 1,000 patients for Zynteglo.
The company only records revenue upon product delivery, not when patients give their cells to start the treatment journey. The gap between those two time points ranges from about four months to five months.
“This timeline underscores that converting starts into deliveries in cash and ultimately revenue is really an element of time as we execute our plan in these early phases of launch,” Klima said.
Cost reductions and potential sales increases may still not be enough for bluebird to break even, as the biotech is separately moving to raise additional cash. During Tuesday’s call, Sterling declined to disclose how much money the company is seeking.
Sterling pointed to bluebird’s recently amended loan agreement with Hercules Capital. Under the updated deal, bluebird can draw $25 million if it secures more than $75 million in gross cash proceeds from financing transactions elsewhere by Dec. 20, 2024. Another tranche of $25 million is available if bluebird can collect $100 million from other financing deals by that time or more than $125 million by June 30, 2025. Certain Lyfgenia patient starts metrics are also conditions for a Hercules capital infusion.
Nevertheless, the CFO said, “that’s not necessarily the cash we’re seeking, nor do we necessarily feel we need those tranches to get there.”
Bluebird has repeatedly faced challenges as the entire gene therapy field has charted a rocky commercial path. Back in 2022, the company reduced its workforce by 30% and backed out of the European market.
“While we face the trials and tribulations of being a pioneer, first in R&D and now commercially, we believe we are well on our way to showing that a standalone gene therapy company can achieve financial sustainability,” Obenshain said on Tuesday’s call.
Editor's Note: The story was updated with additional context around bluebird bio's "going concern" warning.