Thursday, October 10, 2013

Ephemeral $9.4 Million Stem Cell Deal: Bluebird Bio and California Stem Cell Agency

A $9.4 million deal between a Massachusetts biotech firm and the California stem cell agency has quietly collapsed, raising questions about whether the firm will fulfill its promise to open facilities and hire people in the Golden State.

The company is bluebird bio (the company prefers the lower case spelling) of Cambridge, Mass., which was acclaimed for the success of its initial stock offering last June that ultimately raised $116 million.

One year ago this month, the governing board of the $3 billion stem cell agency awarded bluebird $9.4 million with little public discussion. The stem cell agency, which is known as CIRM, said the money would help create “a stem cell and gene therapy approach to correct a genetic disease in young patients with B-thalassemia, an inherited blood disorder that can cause widespread organ damage and premature death.”

In addition to the funds, the action also provided a “Good Housekeeping Seal of Approval” for bluebird from a major and well-respected funding organization. Bluebird said at the time it was “delighted.” Both the “seal” and the ostensible cash proved to be valuable later when generating investor interest in bluebird's stock offering.

Nick Leschly, CEO of bluebird bio, calls himself "chief bluebird"

The award was one of the first in the agency's business-friendly strategic partnership program. However, as months passed, negotiations continued fruitlessly between the CIRM staff and the company, which is 28 percent owned by the storied Boston biotech venture capital firm, Third Rock. 

When asked today about the discussions, Kevin McCormack, CIRM's senior director of public communications, said,
“They decided not to take the money.”
Bluebird, with no fanfare, had already disclosed the breakdown of the deal as part of a routine SEC filing on Aug. 14. The company said,
“The award was conditioned upon terms and conditions by CIRM generally applicable to its grant recipients and the negotiation of a grant agreement with CIRM. No amounts have been received under this award. The company no longer expects it will accept the CIRM award. The company is currently exploring other opportunities to engage in CIRM programs.”
The California Stem Cell Report has queried the company for further explanation and will carry its response verbatim when it is received. The company, however, has not yet even responded to a query from last May.

One of the questions involves statements by bluebird that it planned a substantial expansion in California.

According to the CIRM summary of the review of the bluebird application, the company said,
“We will have at least two clinical sites in California, and more likely up to 4 sites, 2) our viral vector manufacturing will occur in California, 3) our cell processing will occur in California, 4) we will hire several consultants and full-time employees within California to support the program. Overall, several million dollars will be spent employing the services of people, academic institutions, and other companies within the state of California.”
The company has said that it is working with Donald Kohn at UCLA and Elliot Vichinsky at Oakland's Children's Hospital.

The NIH clinical trials Web site shows that bluebird is recruiting patients for a beta-thalassemia
trial at an unspecified location in Oakland.

Last spring, the bluebird Web site listed a California location at 1001 Bayhill Dr, Suite 200, in San Bruno, which is south of San Francisco. An Internet search last spring indicated, however, that is a generic address for a number of business including a realty firm, a roof repair business and a family law attorney. Today bluebird's Web site no longer lists a California location.

Like most biotech companies, bluebird is losing money. According to an article Aug. 15 in the Boston Business Journal by Don Seiffert, bluebird's first quarterly report since going public also showed that the firm “lost share value on a per share net loss that was six times worse than analysts were expecting.”

Stories are important for any company, particularly one that is involved with an initial stock offering. Ben Fidler of Xconomy wrote about the bluebird story just last week. He said,
“Given the failures of gene therapy in the past, how was Bluebird able to raise so much money from both public and private investors? (Nick) Leschly (the company CEO) notes that bluebird had to be careful in the way it told its story to generate excitement rather than fear. To do so, it started with the rare disease it was going after, rather than the method it was using to do it.
“'We needed to retrain peoples’ receptors from not running to the [other] side of the room when you heard the words gene therapy to, ‘just hold on, let us tell you the data,' he says. 'So it really became gene therapy at the intersection of orphan diseases very quickly.'
“What bluebird didn’t anticipate, however, was that gene therapy 'all of a sudden got interesting.' Large pharmaceutical companies started investing in the field again, and it woke investors up, and buoyed bluebird as it tried to raise more cash—ultimately carrying out one of the most successful biotech IPOs this year.
“'I’d love to say it was planned. No, it was good timing I think with a good story, and that combination led to a successful IPO,' he said.”
Earlier today we asked the California stem cell agency for a copy of the letter from bluebird rejecting the $9.4 million. CIRM's McCormack replied,
“Bluebird didn't send us a formal letter or email announcing they were not taking our money. It was a phone call in which they explained that circumstances changed with their successful IPO and the money that came in from that. In light of that success bluebird no longer needed our money to co-fund the project. They were able to move the project forward on their own and decided to do so.
“So how do we feel about this? Well, our goal has always been to help move the most promising therapies into clinical trials, and in this case that is what is happening. Having our independent panel of experts review and recommend their project, and then having our governing board approve funding clearly helps establish the credibility and viability of any company’s research. Funding approval from CIRM is the scientific equivalent of getting the Good Housekeeping Seal of Approval and undoubtedly helped with their IPO. So, now they are moving the project ahead on their own, and we still have almost $10 million that we can use to help other companies and other promising therapies.
“As for their 'exploring other opportunities to engage in CIRM programs' that may be the case but we are not currently in any discussions with them.”
(Photo credit: bluebird bio)

1 comment:

  1. Anonymous11:52 PM

    Cellular Dynamics used its CIRM funding badge to promote its IPO- looks like a business strategy.