Bluebird Bio Raises $60M Series D Round To Treat Rare Diseases

The gene therapy start-up taps diversified public and private investors, as well as strategic backer Shire, for one of the year’s biggest rounds of private capital funding for a biotech thus far.

A diverse group of investors has backed gene therapy start-up bluebird bio Inc. with a $60 million fourth round of funding to support clinical trials on therapies for rare diseases.

The new syndicate includes hedge fund sponsor Ramius Capital Group, public and private growth investors Deerfield Partners and RA Capital, and two unnamed public investment funds. Also participating was Shire PLC, which has made a push into rare diseases the past several years. The Cowen Group, of which Ramius is an affiliate, served as Bluebird Bio’s strategic advisor for the transaction.

Returning investors in the new round included ARCH Venture Partners, Third Rock Ventures, TVM Capital and Forbion Capital Partners. At least two existing shareholders, Genzyme Ventures and Easton Capital Partners, did not contribute additional money, but continue to hold positions in Bluebird Bio; Genzyme retains board observer status.

Bluebird chief executive Nick Leschly, a former Third Rock partner, said $15 million of the new money came from the prior investors. In total, Bluebird has raised $110 million since early 2010, including a $35 million Series B round. Leschly said the 2010 round represented a “resetting” of the company, which developed an industrialized platform for lentiviral gene therapy during the interim after an initial $15.6 million round in 2006. The company was originally known as Genetix Pharmaceuticals.

For its participation, Shire will not receive any options to acquire rights to Bluebird’s treatments, Leschly said. Its proximity will give Bluebird access to Shire’s experience in the rare disease sector, however. Starting with its 2005 acquisition of Transkaryotic Therapies (Also see "Shire Adds Two Pipeline Products With TKT Acquisition" - Pink Sheet, 25 Apr, 2005.), the specialty pharma has built its Human Genetic Therapies division through aggressive business development (Also see "On A Revenue Roll, Shire Takes Specialist Tactics To “Primary Care” Markets" - Pink Sheet, 27 Feb, 2012.). The division accounted for 29% of Shire’s revenues in 2011,

According to Leschly, the hedge fund and private equity fund operators have a longer-term investment view of Bluebird’s prospects than venture investors have, with an eye toward the company’s development for a decade or more. In an interview with “The Pink Sheet” DAILY, Deerfield partner Howard Furst agreed that his firm takes a long view, and even suggested that Bluebird could provide a nearer-term exit than many of its other investments. The firm most often trades in the public markets, although Furst said it usually makes two or three deals each year with privately held life sciences companies.

While Deerfield’s longer-term view could lead to friction with VCs seeking nearer-term liquidity for their limited partners, Leschly said there was “no significant debate” among its investors as the Series D syndicate was formed. Rather, he said, the arrangement adds options if Bluebird should seek to list via an initial public offering.

It’s among the biggest private capital rounds for a biotech in 2012 thus far. The deal is slightly larger than another big round for a gene therapy company; Eiger BioPharmaceuticals Inc. closed a $53 million round in May [See Deal]. Celladon is developing an enzyme-replacement therapy for heart failure patients (Also see "Celladon Hopes To Bring Gene-Therapy Solution To Heart Failure Patients" - Pink Sheet, 16 Apr, 2010.).

Two Clinical Programs, One Platform

Bluebird’s technology allows it to extract bone marrow stem cells from a patient, genetically modify the cells using viral vectors, and return them to the patient. In some disorders, the procedure could replace the need for an allogeneic transplant from a matched donor, and reduce the hazards of post-transplant complications.

The new funds are earmarked primarily for ongoing and further studies of therapies based on the proprietary platform. The most advanced program, called Lenti-D, is slated to enter a Phase II/III trial for childhood cerebral adrenoleukodystrophy in 2013. Both FDA and the European Medicines Agency have granted Bluebird orphan drug designation for the indication. CCALD is a rare neurogenerative disease that typically appears in boys between three and 10 years old, and is one of several forms of adrenoleukodystrophy. Leschly said that although the company has chosen to pursue approval for the childhood form first, it is likely to seek further approval for adult indications if all goes well. Bluebird also has Lenti-Globin, a treatment for beta-thalassemia and sickle-cell disease due for a Phase I/II study next year.

When the Series C round was announced in April 2011, Bluebird Bio had planned to move each into those studies within a few months. Leschly said that the platform and manufacturing infrastructure for its treatments have both been refined considerably over the past year, leading Bluebird to delay the beginnings of the trials. It will benefit from greater scale at reduced cost as a result, he said.

In an unusual side note to the deal, the cash that Bluebird’s early backers contributed to the Series D round was originally slated for the second tranche of the company’s Series C round. But Bluebird had negotiated a “call” option for itself into the tranche; instead of requesting more Series C money, the company forged a Series D deal at a higher valuation, and the prior investors chose to participate (Also see "Bluebird Bio Raises $30 Million Series C To Accelerate Pipeline Development" - Pink Sheet, 20 Apr, 2011.).

Bluebird will explore partnerships for at least one drug, atlhough no deal is imminent, Leschly said. He said that while it would be “a stretch” to launch a beta-thalassemia treatment globally on its own, Bluebird could become a fully integrated company that supports an adrenoleukodystrophy drug one day. “That’s the dream,” he said.

Until it chooses a partner or seeks a source of additional capital, Bluebird is fully funded until 2015, Leschly said.