EXCLUSIVE: More Details on Horizon For White Hot Gene Therapy M&A, Says Analyst

Published: Jul 02, 2015

EXCLUSIVE: More Details on Horizon For White Hot Gene Therapy M&A, Says Analyst
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. But could more deals of that type be on the horizon? GlobalData polled 700 qualified business analysts and 25,000 interviews conducted with industry insiders to glean this data.

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 second installment LINK TO FIRST ARTICLE of a two-part interview we conducted this week.

BIOSPACE: What’s been bringing in the highest deal-making numbers? Why do you think that is?

In addition to capital raisings (mentioned above), 2014 saw 17 licensing deals valued at nearly $1.5 billion and, halfway through 2015, there have been 23 deals worth $3.7 billion – a huge number for this space. Many of these deals involve clinical products surrounding top therapeutic areas: oncology, CNS, ophthalmology, genetic, and cardiovascular disorders, namely ALS, Parkinson’s disease, hemophilia, congestive heart failure, retinitis pigmentosa, and Mucopolysaccharidosis.

BIOSPACE: What do you see on the horizon for these deals in 2015 and 2016?

We will have to see – in this area of inquiry, the “devil is in the data.” Each deal will have to be examined on its own merits. One of the largest deals struck in the gene therapy space was BMS’ $1 billion deal with uniQure , giving BMS exclusive access to UniQure’s gene therapy platform technology for multiple targets in cardiovascular disease, mainly congestive heart failure. UniQure is developing a gene therapy intended to restore the heart’s ability to synthesis S100A1, a calcium-binding protein which regulates myocardial contractility. However, this candidate is still in early preclinical studies.

bluebird bio just announced a partnership with Kite Pharma, Inc. to develop and market a new class of T-cell immunotherapies to treat HPV-associated cancers. T-cell Receptors (TCRs) make it easier for the body’s immune system to identify and destroy cancer cells. They have gained considerable interest among drug developers, much like CAR-T cells, and are considered to be as promising as them.

BIOSPACE: Why are equity offerings such an attractive option?

Well, it seems as though investment banks and private equity firms are willing to take the most risk and pony up dollars to invest in gene therapy firms. Most firms developing gene therapies do not have any revenue stream, so they have to look to the financial community in order to raise money for funding their operations. Deutsche Bank , Barclays, Cowen and Company, and J.P. Morgan are a few of the top investors in gene therapies.

BIOSPACE: Any other thoughts?

One of the major roadblocks is paying for gene therapies. A handful of gene therapy companies are working on a new payment model that rewards them for the long-term performance of their innovative medicines. Through this effort, which is being led by BioMarin Pharmaceutical Inc. and Sangamo BioSciences, Inc. , companies are devising a new ‘annuity-like’ payment scheme whereby the high price of the drug would be amortized over a period of time contingent on proof that the treatment is effective and safe.

For instance, if Sangamo’s hemophilia drug wins approval, a one-time administration could replace the need for frequent, life-long infusions of clotting factors, such as Pfizer Inc. ’s Xyntha (antihemophilic factor), and Baxter’s Advate (antihemophilic factor [recombinant]), which can cost up to $300,000 a year for a single patient. The annuity-like payments would be stopped if medical testing, such as the level of clotting protein measured in a patient’s blood sample, showed that the therapy was not working.

As it stands right now, gene therapies may initially impose a very high burden on the healthcare system, and the drugs on which the annuity-like payment model would be based may not reach the market for several more years, if at all. Nonetheless, the interest in new payment models reflects the healthcare industry’s intention of finding new ways to bolster profits as insurers push back against soaring drug prices.

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That’s lead BioSpace to ask, what do you think about the drug approval process in this country? Let us know your ideas.

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