With multi-billion-dollar gene therapy merger-and-acquisition (M&A) deals bookending 2019, a panel of investors this week predicted more of the same for 2020.
Ellen Hukkelhoven, managing director at the healthcare investment firm Perceptive Advisors, noted that investor interest in gene therapy was cemented by a pair of key deals that framed 2019: Astellas’ planned $3 billion acquisition of Audentes Therapeutics, announced Monday, and Roche’s planned $4.8 billion purchase of Spark Therapeutics, which was announced in February but has since been held up by months of U.S. Federal Trade Commission review.
“I think that those deals show you where the investment community has focused over the last year, and I think that’s going to continue next year,” Hukkelhoven said during “A Look Ahead at Biotech in 2020,” a panel event presented by STAT+ in New York City, at the conference venue Convene.
The Roche-Spark deal is not included in the $5.261 billion in M&A gene therapy deals reported by the Alliance for Regenerative Medicine for the first three quarters of this year. Even if it were, the value of 2019 M&A deals would still fall below the $18.944 billion for all of 2018, and $13.542 billion for 2017—though Astellas-Audentes brings this year’s figure close to 2017’s, and 2019 still has about four weeks to go.
Hukkelhoven and other investor panelists added that the gene therapy field faces some proverbial headwinds heading into the new year. One is the lack of consensus by payers over how to reimburse healthcare providers for new treatments.
“We need payment models to evolve,” Hukkelhoven added. “In some cases, it’s easier to do that if you have a biomarker and you could pay for performance.”
Avexis, a Novartis Company, she noted, has offered payers reimbursement models allowing them to pay for performance, and pay over five years for its gene therapy Zolgensma® (onasemnogene abeparvovec-xioi), indicated for children less than two years of age with the most severe form of spinal muscular atrophy (SMA).
Zolgensma carries a sky-high list price of $2.1 million, though Novartis has emphasized that it is developing discounted patient-access programs with insurers.
“I think that ultimately, society will want cures, and they will figure out a way to pay for it,” Hukkelhoven predicted. “But right now, that’s very unclear.”
When panel moderator Adam Feuerstein, STAT senior writer, biotech, cited another challenge to gene therapy development—the small number of patients assessed in clinical trials for new treatments—another investor panelist said the big-dollar deals showed him that biopharmas appeared unfazed by the limited data.
“I think, frankly, the fact that we’ve seen so many gene therapy buyouts this year suggests that they are underappreciated,” said Patrick Nosker, senior analyst, Affinity Asset Advisors, a hedge fund focused on biotechnology and therapeutics. “I don’t really think that it’s crazy for somebody to go off on an N [number of patients] of two, because a lot of these things are—it’s not like you’re testing chemotherapy where you don’t really understand the [disease] mechanism super well, or there are a lot of side effects. You’re putting in the defective protein. If they’re making the protein, they’re probably going to get better. It’s a lot simpler and you don’t need the same numbers of patient data.”
“Realistically, if you have a company that can solve one disease with a gene therapy, there are almost limitless other diseases that can be solved with it,” Nosker added. “You have basically everything you can go after.”
Nathan Sadeghi-Nejad, partner at Palkon Capital Management, observed that the clinical development of the spark-developed Luxturna® (voretigene neparvovec-rzyl)—marketed in Europe by Novartis—and Factor IX replacement therapies for hemophilia, showed strongly positive durability of treatment, so that patient population was less a challenge than paying for treatment.
A payer has no way to know whether a patient who is covered for a gene therapy treatment may change jobs and end up with another insurer, he said.
“I actually see the problem with gene therapy more of a structural payment problem,” Sadeghi-Nejad said. “Unless you do something like a pay-over-time model, I think there’s going to be hesitancy on the part of the payers.”
Hukkelhoven said the strength of positive results shown by many gene therapies has served to de-risk their development, enhancing the attractiveness of M&A deals.
Feuerstein acknowledged the promising science behind gene therapy during a separate panel discussion with three of his colleagues: “Even though I have some qualms about the small amounts of data that we get, and some of the hype that comes around, and some questions about things that you can conclude from two or three patients, just from a science perspective, the fact that we’re talking about curing some of these diseases that are really horrible diseases, fatal, in kids often, it’s pretty remarkable when you think about it.”
Feuerstein and his colleagues highlighted several challenges that stand between that science, and widespread uptake of gene therapy by patients. One is science-related—namely the fact some genes are simply too large to be packed into vectors and infused into patients: “I think that we’re many, many decades out from gene therapies to treat things like cardiovascular disease—I hope it’s gone by the time we get there—or malaria,” said Matt Herper, STAT senior writer, medicine, and editorial director of events.
Another challenge is the longtime manufacturing bottleneck that has resulted from demand for virus exceeding supply, and that demand growing rapidly as new therapies reach the clinic, if not the market—a challenge that several manufacturers have addressed in recent years with new facilities, agreements with CDMOs, or both.
“I don’t know that we’re ready, infrastructure-wise for large-scale rollout of gene therapy,” said Kate Sherida, a STAT general assignment reporter. “It’s a field that demands a certain amount of expertise and a certain amount of investment to be able to actually produce these drugs. And I’m not convinced that we have enough of that capacity to do that on a very, very large scale.”
Damian Garde, STAT national biotech reporter, questioned if gene therapies will ever drop in price enough to be widely used by patients, as generics supplanted many small-molecule drugs as patents expired—but which has not happened as much with biologics or even biosimilars.
“You can see benefits there in terms of the pace of innovation, but on the other side of it, what’s a generic gene therapy? When will we reach the point where there would be enough competition to where it would have to be available for dollars a day?” Garde asked.
In between both panel discussions, Murray Aitken, a senior VP with IQVIA and executive director of IQVIA’s Institute for Human Data Science, agreed with panelists who said gene therapy’s primary challenge to broader use remains one of payment for treatments costing more than $1 million in some cases, even if payers and health technology assessment agencies acknowledge their value.
“That’s not a problem we can’t solve,” Aitken said. “But we can only do it if there’s an alignment of interests around that, where we get to actually talking to each other and not past each other, and recognize that this is where the science is going.”
Aitken said the U.S. Centers for Medicare and Medicaid Services (CMS), as the nation’s largest payer, should take a lead role in bringing stakeholders together to forge a consensus on gene therapy payment.
“We’re going to have more precision medicines many more targeted therapies. We’re going to have higher response rates by patients. We’re going to have less wastage in the system. We’re going to have these one-time cures in terms of gene therapies,” Aitken said. “We need payers and we need providers, and we need the patients there as well to actually rethink how we need to organize ourselves.”