Gene Therapy Outlook: An Executive’s Perspective
The gene therapy space is ripe for mergers and acquisitions (M&As). Within the past year, Biogen acquired Nightstar, Roche purchased Spark, and Astellas grabbed Audentes. M&As will not only continue in the space but also accelerate.
Acquisitions, however, present tension to big pharma and gene therapy companies. Should the giants seek extraordinarily generous licensing terms, particularly around later-phase or clinical assets, or acquire entire organizations? On the other side, should biotech, gene therapy, or genome editing companies license agreements around principal if not significant percentages of their technology value or market caps as they evolve their business strategies? Should they leave little to nothing for an acquirer to come in and pick up? Do they remove the opportunity for an exit?
Scanning the list of the major pharma players, I’m positive all of them are making major strategic decisions regarding their approach to this space. All will tell you that they’re looking at companies that have been clinically de-risked – essentially later stage companies. Whether it’s an adeno-associated virus (AAV) platform company, a genome editing company, or even a cell therapy platform company, executives don’t mind if the smaller companies out-license some of the more mature programs if the platform has legs. They’ll also seek those with enough runway or platforms to which multiple products can be applied.
Beyond single-gene targets, big pharma is beginning to look at pathways and multi-gene targets: the next generation of the science as well as company formations. In other words, big pharma will be looking to skate to where the puck is going.
Areas of Focus
So where’s the puck going? AAV evolution is a major development area. Virtually every gene therapy and genome editing company using AAV is investing enormous resources in the development, optimization, and continued evolution of various serotypes in the AAV platform. For examples, see 4D Molecular Therapeutics and Voyager Therapeutics. All the major gene therapy companies have worked hard to find novel or best-in-class serotypes for specific tissues. You can see that playing out in some of the earlier-generation vectors that are now in advanced clinical trials.
On the non-viral side, we will see continued progress in tissue-specific delivery with non-viral vectors or approaches. Those are more transient, but from a genome-editing perspective, where you can get permanent modification, it offers significant opportunities.
In terms of the stem cell space, the bluebird bio approach, which uses modified retrovirus, is the most advanced. That program is in registration in Europe and is moving forward in the treatment of beta thalassemia and sickle cell anemia. But second-generation approaches – including non-viral delivery, genome editing with CRISPR, and zinc finger nucleases – in theory offer significant differential technical advantages over a retrovirus.
For further insights on the companies to watch, I recommend viewing J.P.Morgan’s recent presentation.
With many exciting treatments coming down the pike, a key challenge will be meeting manufacturing demand. Contract manufacturing organizations are making significant efforts to increase the kind of capacity needed for phase-three and market launch approaches. Pfizer is putting a stake in the ground in terms of committed viral vector manufacturing, based on both the Spark deal as well as the upcoming hemophilia A program. But that’s a drop in the bucket. As investors evaluate commercial launches and therefore market penetration, particularly for some of these high-dose viral vectors, they’ll find it’s not a trivial undertaking.
Access to capital will, of course, remain important for biotech companies. That gets into the tension between out-licensing lead programs and leaving enough technology value and product value within the company such that shareholders retain a real upside. Finally, personnel is always an issue, and attracting and retaining great people is a tension in any technology industry.
How insurers and patients will pay for these treatments is also a big question mark for the space. The Alliance for Regenerative Medicine (ARM), a group in Washington D.C., and the ARM Foundation published a report on reimbursement that I highly recommend. Given the state of the U.S. private insurance system, payments will be complex. I believe these products will be approved with clear safety and efficacy data, but we won’t have long-term outcome data, and a bias will exist toward pay-for-performance kinds of outcomes. With the absence of long-term durability data, pricing therapies at a premium will be difficult.
There’s a bright spot among all these challenges: the FDA’s Center for Biologics Evaluation and Research and the cell and gene therapy group are well informed and excellent industry partners. That’s something companies and investors can feel positive about as they navigate launching these amazing new treatments to the market.
About Edward Lanphier
Edward Lanphier was the Founder, President & CEO (1995-2016), and Chairman of the Board (2016-2017) of Sangamo Therapeutics. Previously, he was the Executive Vice President of Commercial Development at Somatix Therapy Corporation, a first- generation gene and cell therapy company. He is also currently a Board Member of the Buck Institute for Research on Aging since 2011.
This article is adapted from the Gene Therapy Outlook – An Executive’s Perspective. If you would like access to this teleconference or would like to speak with Edward Lanphier, or any of our more than 700,000 experts, contact us.
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