A Bluebird on My Shoulder…

The recent bluebird bio IPO has further buoyed expectations for gene therapy, early stage biotech and rare diseases. Is the euphoria justified? Perhaps for investors. But bluebird still has a ways to go before it has an approved therapy, as do other recent biotech IPO winners.

So, what can we infer from the market’s Zip-A-Dee-Doo-Dah mindset – particularly in the face of so many concerns elsewhere? A couple of things, I think:

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  1. They see rare diseases as a category likely to avoid being squeezed by downward pricing pressures from the Affordable Care Act and the broader burden of health costs in our economy. Thus, the potential payoff makes taking on higher risk more tolerable.
  2. Perhaps investors and others feel as though the technology and science has advanced to the point that gene therapy can overcome some of the previous failures and achieve curative end points, which should also command high prices.
  3. It may also be that they see the U.S. emerging from what I call the “innovation recession,” characterized by: a) an evaporation of funding for anything early stage; b) an abandonment of enthusiasm for long-term, potentially game-changing innovation in favor of short-term, incremental value-driven advancements; and c) big pharma’s focus on consolidation, rather than collaboration, and resulting ‘right-sizing,’ re-structuring and outsourcing of the research side of R&D.

Are these recent signs evidence of a trend? While I wouldn’t say “everything is satisfactual,” we do seem to be coming into better times for the innovator – and that’s good news not just for the market, but for the entire health system.