Astellas Pharma has agreed to acquire Audentes Therapeutics for approximately $3 billion cash, in a deal the companies said last night was intended to create a top-tier gene therapy developer.

Upon completion of the deal—which is expected to take place in the first quarter of 2020—Astellas would add to its four Primary Focus Areas with a fifth that will focus on “genetic regulation,” a category broad enough to include gene therapy, which Astellas and Audentes asserted “will be a key driver of the company’s future growth.”

“By joining together with Audentes’ talented team, we are establishing a leading position in the field of gene therapy with the goal of addressing the unmet needs of patients living with serious, rare diseases,” Astellas president and CEO Kenji Yasukawa said in a statement.

At least one set of analysts agreed with Yasukawa’s ambitious vision for the combined company, under which Audentes would continue to operate as an independent subsidiary of Astellas.

“We believe that the combined entities are expected to provide an industry-leading gene therapy company with [Audentes]’s growing neuromuscular portfolio expected to complement Astellas’ existing pipeline,” Joseph P. Schwartz, managing director, rare diseases with SVB Leerink, and two of the firm’s equity research associates, Dae Gon Ha, PhD, and Joori Park, PhD, concluded in an investor note.

Investors responded with a buying spree that more than doubled Audentes’ share price in early afternoon trading on the Nasdaq Global Select Market, up 105% from yesterday’s closing price of $28.61 to $58.77 as of 2:15 p.m. today. Shares of Astellas on the Tokyo Stock Exchange slipped 1% at the close of trading there, to ¥1,877 ($17.29).

Audentes’ gene therapy pipeline is led by AT132, an adeno-associated virus 8 (AAV8) vector containing a functional copy of the MTM1 gene, as a treatment for X-Linked Myotubular Myopathy (XLMTM).

Positive Phase I/II data

On May 1, Audentes reported positive safety, efficacy, and muscle biopsy data from the ongoing Phase I/II ASPIRO ascending-dose trial (NCT03199469), which is designed to assess the safety and efficacy of AT132:

  • Of 11 patients enrolled in ASPIRO as of the April 8, 2019 data cut-off date, most showed progressive attainment of motor developmental milestones, such as head control, sitting unassisted, crawling, standing with support, and initiating stepping movements.
  • Patients receiving AT132 achieved reductions in ventilator dependence not previously observed in chronically ventilated patients with neuromuscular disorders.
  • Four patients were successfully weaned off of ventilation by the 48-week timepoint, with all other treated patients demonstrating sustained and clinically meaningful reductions in ventilator use.

ASPIRO’s principal investigator, Perry B. Shieh, MD, PhD, of UCLA, presented trial data at the 22nd Annual Meeting of the American Society of Gene and Cell Therapy (ASGCT), held in San Francisco. Data was based on 48 weeks of follow-up for seven patients enrolled in Cohort 1 (1×1014 vector genomes per kilogram (vg/kg); six treated and one untreated control) and 24 weeks of follow-up for four patients in Cohort 2 (3×1014 vg/kg; three treated and one untreated control).

AT132 has received the FDA’s Regenerative Medicine and Advanced Therapy (RMAT), Rare Pediatric Disease, Fast Track, and Orphan Drug designations—as well as the European Medicines Agency’s Priority Medicines (PRIME) and Orphan Drug designations.

The rest of Audentes’ pipeline consists of four preclinical gene therapies. Three candidates—AT702, AT751, and AT753—are designed to target Duchenne Muscular Dystrophy (DMD). The other two candidates are AT845 targeting Pompe disease, and AT466 targeting myotonic dystrophy (DM1).

In-house cGMP manufacturing

Astellas and Audentes reason that they can accelerate development of a pipeline of new—and, they say, potentially best-in-class—genetic medicines for rare neuromuscular diseases by combining Astellas’ scientific expertise and global resources with Audentes’ AAV gene therapy technology platform, neuromuscular development expertise, and in-house large-scale cGMP manufacturing.

In April, Audentes launched a new South San Francisco-based internal cGMP plasmid manufacturing facility, with the aim of enhancing a critical element of its supply chain—providing high-quality nonclinical and cGMP-grade plasmids for all of its development programs.

While Audentes said its previous 1,000-L scale manufacturing operation provided sufficient capacity for global commercialization of AT132, as well as continued clinical development of pipeline programs, the new facility has been sized for expansion to add an additional 8,000 L of production capacity over time.

Astellas and Audentes added that the deal would create the opportunity for additional gene therapy partnerships and pipeline expansion by leveraging Audentes’ manufacturing capabilities and relationships with patient groups, academic collaborators, and scientific advisors.

“With its focus on innovative science and a global network of research, development, and commercialization resources, we believe that operating as part of the Astellas organization optimally positions us to advance our pipeline programs and serve our patients,” Audentes chairman and CEO Matthew R. Patterson stated.

“An appealing hotbed”

At $60 per share in cash, Astellas’ purchase of Audentes represented a premium of more than double (110%) Audentes’ closing share price yesterday of $28.61.

The deal is subject to customary closing conditions that include U.S. antitrust clearance and the tender of a majority of Audentes’ outstanding shares of common stock in a tender offer that an Astellas subsidiary is expected to commence in the next few weeks, and which is set to expire 20 business days later unless extended.

Astellas acknowledged that it may be required to extend the tender offer under certain circumstances if the offer conditions have not been satisfied.

Astellas added that it had yet to finish reviewing the impact of the acquisition on its financial results for the fiscal year that ends March 31, 2020.

The SVB Leerink analysts noted that the deal comes months after another announced merger-and-acquisition (M&A) deal involving a pharma giant and a smaller gene therapy developer: Roche agreed to acquire Spark Therapeutics for $4.8 billion  in February, but the planned purchase has been tied up since then by a lengthy U.S. Federal Trade Commission regulatory review that has concerned market-watchers.

The Astellas-Audentes deal “may signal big pharma’s optimism towards M&A and that the gene therapy sector remains an appealing hotbed for innovative and value-creating targets,” the SVB Leerink analysts concluded.

“We remain positive on gene therapy companies—particularly those with internal manufacturing capabilities—and subsequent M&A activity in the gene therapy space would not be surprising to us.”

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