This Little Biotech Could be a New Acquisition Target for Allergan and Biogen

This Little Biotech Could be a New Acquisition Target for Allergan and Biogen September 21, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Since the Pfizer and Allergan merger fell through, Allergan has been on a roll with a series of regular deals, most recently the announcement yesterday that it was acquiring San Francisco-based Tobira Therapeutics in a deal that could hit $1.695 billion. But that deal hardly puts a dent in the $40 billion or so the Dublin-based Allergan has in cash. Where else to spend the money? TheStreet offers up Applied Genetic Technologies Corporation .

Headquartered in Alachua, Florida and Cambridge, Massachusetts, Applied Genetic Technologies focuses on gene therapy in the ophthalmology arena. It has a number of products in either Phase I trials or proof-of-concept for X-linked Retinoschisis, an inherited form of retinal degeneration, Achromatopsia, a form of inherited blindness, X-Linked Retinitis Pigmentosa, a form of inherited night blindness, and Age-related macular degeneration (AMD), the leading cause of blindness in the U.S.

Allergan also recently acquired privately-held Oculeve and Retrosense Therapeutics to strengthen its eye-care business. That would make AGTC a good strategic fit.

AGTC was incorporated in 1999 based mostly on tech from the University of Florida and Johns Hopkins, the University of Pennsylvania, and the University of Alabama-Birmingham. It launched its initial public offering (IPO) in April 2014 at $12. In July 2015, it inked a deal with Biogen (BIIB), which included a $30 million investment, giving Biogen an 8 percent share of the company.

TheStreet notes that Biogen , with $4 billion in cash balances, could also buy the company.

Robert Wasserman, writing for TheStreet, says, “After reaching trading highs in 2015 following the Biogen announcement and buyouts including Ocata, AGTC’s share price has fallen well below the investment price from Biogen and even just recently below the $12 IPO price. Meanwhile, shares and valuations of other gene therapy companies, most notably Spark Therapeutics and bluebird bio have performed more favorably this year and have market capitalizations close to $2 billion.”

But Wasserman also notes that, at least when it comes to gene therapy, investors seem to have distorted opinions of who’s worth what. He points out that uniQure NV , which has the only gene therapy that’s been approved, has a market cap under $200 million. AGTC’s current valuation is $160 million, which is significantly lower than the company’s estimated cash, equivalents and investments of more than $170 million.

From what anyone can tell, the reason for AGTC’s stock drop is related to enrollment in its clinical trials slowing down. Wasserman writes, “Release of any clinical trial data now seems most likely in 2017, rather than 2016, delaying potential milestones and adding to long-term cash requirements, although in July AGTC management stated that it felt that it had sufficient funds to complete enrollment and analysis of the XLRS trial and both ACHM trials and initiate and analyze initial data from the Phase I/II trial for XLRP.”

In hopes of getting the company’s stock moving again, Wasserman suggests three general strategies. First, the company needs to reorganize its two clinical programs in terms of enrollment timelines. Second, it needs to make progress on other long-term targets, including for wet AMD, and adding more strategic partnerships besides Biogen. And finally, Wasserman says, “AGTC has recently announced plans to increase its expertise in adeno-associated virus (AAV) vector design, delivery and manufacturing through several new collaborative agreements, additional research personnel, and expanded research facilities. Any monetization of this effort could provide new impetus to investor awareness of these beaten-down shares.”

Applied Genetic Technologies is currently trading for $8.96.

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