Like many biotechs, Bluebird Bio's (NASDAQ: BLUE) stock has been volatile over its lifetime. The company, which specializes in gene-editing therapies, has struggled with high costs and limited patient populations for two of its three approved products, plus looming competition for the third.
The company was thrown something of a financial lifeline on Monday, however. Cautiously optimistic investors pushed the stock's price up by 1.4% in reaction. That was good enough to beat the S&P 500 index's 0.6% bump higher.
$175 million loan facility secured
Before market open, Bluebird Bio announced that it secured a $175 million term loan facility from finance company Hercules Capital. The term is five years, and the funds will be made available in four tranches; the biotech drew $75 million in the first tranche following the closing of the agreement.
The next two tranches, of $25 million apiece, are contingent on Bluebird Bio hitting certain commercial milestones. The company did not provide details of those milestones. The fourth and final tranche of $50 million is entirely at Hercules Capital's discretion.
One advantage of the deal is that during the first three years of the five-year term, Bluebird Bio will be responsible solely for interest on the borrowings it draws.
Cash for a struggling business
In the press release trumpeting the arrangement, Bluebird Bio quoted its CFO Chris Krawtschuk as saying that it "underscores the value bluebird offers as a stand-alone gene therapy leader and meaningfully extends our runway." The company said the funding should extend that runway beyond the next two years; it did not get more specific.
While additional funding is always welcome to some degree, in Bluebird's case it highlights the company's financial struggles. Many eyes will be on management to see how effectively it spends that money.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Bluebird Bio. The Motley Fool has a disclosure policy.
