Tuesday, December 18, 2012

Financing Deal of the Year Nominee: bluebird bio

It's time for the IN VIVO Blog's Fifth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

With its cummingsesque orthography and ornithological name, bluebird bio has a certain innocuousness at first blush. But bluebird bio is certainly serious about its gene therapies for rare diseases, which have attracted serious capital to make it a very serious contender for this year’s Roger in the exit/financing category.

Closed in July, bluebird bio’s $60 million Series D round was a little like a few other Roger contenders. Like Warp Drive Bio, backed with $125 million in a January Series A round, bluebird bio enjoys close ties to early-stage powerhouse investor Third Rock Ventures. And like Intarcia Therapeutics, bluebird bio raised its latest round largely from institutional investors including Ramius Capital Group, Deerfield Partners and RA Capital rather than traditional venture firms. But bluebird bio’s round was a standout unlike any other, for several reasons.

First, bluebird bio’s investors doubled down on the company just weeks before uniQure BV’s Glybera (alipogene tiparvovec) received European approval, becoming the first gene therapy cleared for marketing in the world. The approval of Glybera, which uses a viral vector to insert genetic material into cells containing malfunctioning genes, is thought to pave the way for more gene therapy approvals.

The approval has emboldened a sector once regarded as terribly risky, but now considered viable by some investors, thanks to larger data sets and a more transparent regulatory process. And while bluebird bio’s original investors, including Forbion Capital Partners (also a uniQure investor), Third Rock, ARCH Venture Partners and TVM Capital, had already poured $50 million into the company prior to this summer, the massive Series D round would be a prescient investment if VCs increasingly look to the sector and drive valuations north.

Moreover, bluebird bio showed forethought by rejecting the second tranche of its April 2011 Series C round, for which it had negotiated a call option, then offering the same Series C investors the choice of participating in the Series D round at a higher valuation. The unusual step resulted in bluebird bio giving away a pinch less equity in the deal, while receiving the same amount of cash from those VCs.

Cambridge, Mass.-based bluebird bio will focus initially on its Phase II/III program in childhood cerebral adrenoleukodystrophy, as well as Phase I/II programs in beta-thalassemia and sickle-cell disease. The company’s approach involves extracting a patient’s bone marrow stem cells, modifying them ex vivo by inserting a lentivirus containing genetic material, and reintroducing the cell’s to the patient’s body. The technique is somewhat unlike uniQure’s, which uses a non-dividing adeno-associated virus that has been stripped of its replicating abilities.

Though development is costly, bluebird bio says its manufacturing process has been streamlined heavily over the past couple of years, allowing it to create therapies at what its executives call “industrial scale.” Those techniques could be very important in the future, especially if gene therapies are eventually approved for disorders other than rare diseases. (Glybera is approved for lipoprotein lipase deficiency, an orphan disease.) And since bluebird bio aims to address sickle-cell disease, a widespread disorder in some geographies, manufacturing and production at a reasonable cost will be vital.

In a year when one gene therapy was approved, other companies such as Celladon raised big rounds, and more gene therapy start-ups are known to be raising money, bluebird bio’s round was the biggest in the promising sector. Consider it for the Roger as it takes flight.

--Paul Bonanos
flickr image via petrazone // creative commons

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