EXCLUSIVE: Gene Therapy M&A Booms, Increasing 40-Fold to $4.9 Billion

Published: Jul 01, 2015

EXCLUSIVE: Gene Therapy M&A Booms, Increasing 40-Fold to $4.9 Billion
July 2, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

A new study from research and consulting firm GlobalData shows that the total number of deals in the global gene therapy market more than doubled from 16 in 2013 to 36 in 2014, with their combined value rising spectacularly from $122.8 million to $4.9 billion over the same period.

That’s a 40-fold increase, a spectacularly high number for the gene therapy field, where M&A is usually mild, because the technology remains highly experimental and the majority of products are in early-stage clinical development.

GlobalData said that despite this, the impressive growth in the overall deals value for 2014 was boosted primarily by Abbott Laboratories ’ $2.9 billion acquisition of CFR Pharmaceuticals, a Chilean biotechnology company developing gene therapeutics for alcoholism and chronic pain. GlobalData based its research and analysis on the knowledge of over 700 qualified business analysts and 25,000 interviews conducted with industry insiders annually.

But could more deals of that type be on the horizon? BioSpace chatted with Adam Dion, senior industry analyst for GlobalData, about what these numbers mean and how they could affect the entire sector. Here is the first installment of a two-part interview we conducted this week.

BIOSPACE: Can you talk a bit about how these numbers are different than what we would have seen a year or two ago?

Licensing, partnerships, and capital raisings represent the majority (94%) of deals struck since 2009. However, there have been a couple of large acquisitions, including Abbott Labs’ $2.9 billion deal for CFR Pharma, and Upsher-Smith Laboratories, Inc.’s stake in Proximagen for $555 million. M&A deals in the gene therapy field are very rare, with only about 10 deals dating back over the past six years. As a result of the majority of gene therapies still remaining in preclinical development, companies mainly rely on licensing and partnerships to advance these clinical assets. This allows investors to dip their toes in the water and minimize risk while assets are brought into later stage trials.

One of the main drivers of the increase in gene therapy deals was a surge in capital raisings from five deals in 2013 to 22 deals in 2014, worth approximately $1.2 billion. Equity offerings and venture financing are common sources of deal activity among gene therapy firms seeking to raise funds for their R&D and operational requirements. One significant IPO came in 2014 when Avalanche Biotechnologies raked in $119 million. Additionally, in 2015, Spark Therapeutics and Cellectis both raised $185 million and $228 million, respectively.

BIOSPACE: How much has the gene therapy rise been tied to the biotech’s sector bull-run?

There is a direct relationship to the biotech sector’s bull-run. With valuations and deal premiums at very high levels, this has created a halo-effect, which has cascaded onto the gene therapy field.

Companies developing therapies in this space have therefore reaped a residual benefit. The EU’s approval of Glybera (alipogene tiparovec) back in 2012, while some time ago, did signal to the market that gene therapies are indeed tenable; however, the next step is how to pay for them. Also, promising clinical results from leading players, such as bluebird bio, Spark Therapeutics, and Avalanche.

Biotechnologies led many investment banks to raise their price targets on gene therapy stocks, which have been followed by additional fund raising.

However, it is also worth noting that the gene therapy field is still very experimental, and comes with a high failure rate. We saw this in April, when Celladon announced that its Phase IIb CUPID-2 trial of its heart drug, Mydicar, failed to meet its primary and secondary endpoints. As a result, the company’s stock lost nearly all of its value. Celladon has dropped Mydicar development and is now in discussions with financial advisors to create a strategic plan for a merger or sale of the company, or even possible liquidation in order to distribute any remaining cash back to shareholders.

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