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Amid gene therapy M&A flurry, analysts zero in on biotechs ripe for takeovers

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Amid gene therapy M&A flurry, analysts zero in on biotechs ripe for takeovers

As yet another gene therapy company, this time Nightstar Therapeutics PLC, gets snapped up in the flurry of M&A activity thus far in 2019, analysts are speculating which experimental biotechs may be next.

While gene therapy comes with its own set of hopes and hypes, it is not without its risks, the analysts noted, as it requires significant time and knowledge. Their picks include uniQure NV, Audentes Therapeutics Inc., possibly Solid Biosciences Inc. and even the relatively larger BioMarin Pharmaceutical Inc. due to their experience and know-how. All four companies — identified by Leerink analysts Joseph Schwartz and Dae Gon Ha after Biogen Inc. swooped in on Nightstar have gene therapy programs that have exhibited "clinical expertise."

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Gene therapy clinical trials are likely to see heightened scrutiny from regulators due to their novelty, with only a handful of U.S. Food and Drug Administration-approved curative, one-time treatments on the market. One of these is Spark Therapeutics Inc.'s Luxturna, which treats an inherited retinal disease that causes vision loss.

In addition, gene therapy's expensive reputation has preceded itself, with talk of seven-figure price tags drawing attention from officials already concerned about unaffordable drugs.

Nevertheless, the financial risks and time commitment have not stopped Roche Holding AG, Novartis AG, Astellas Pharma Inc. and PTC Therapeutics Inc. from paying premium prices for gene therapy developers, as pharma companies look to add assets to broaden and deepen their drug pipelines.

"Just as biologics provided a fertile environment for transactions in the past, we believe gene therapy is a logical area for M&A," Schwartz and Ha wrote Dec. 17, 2018.

Investors, meanwhile, have spread around their money. Syncona Ltd., Wellington Management Group LLP, Redmile Group LLC and Woodford Investment Management Ltd. all have stakes in Nightstar; Wellington and Redmile additionally have common equity in Audentes and fellow gene therapy developer REGENXBIO Inc. And Wellington's vested interests in Solid Biosciences, Spark, bluebird bio Inc. and BioMarin are shared by FMR LLC.

Bristol-Myers Squibb Co., which plans to snag Celgene Corp. and its cell therapy programs in a proposed acquisition valued at $95 billion, is also one of UniQure's largest stakeholders; Bristol-Myers and UniQure have an ongoing collaboration for the latter's gene therapy programs in cardiovascular disease.

Ready for market, ready for acquisition

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The four highlighted companies might be attractive prospects due to their manufacturing readiness, Schwartz wrote in a Feb. 25 note that also identified Nightstar as a possible target.

"Revisiting the [Novartis-AveXis] and [Pfizer Inc.]-Bamboo transactions, both acquirers followed up on their transactions with plans to expand capacity," Schwartz said, positing that Roche will do the same with Spark Therapeutics under its belt.

According to Schwartz, Audentes uses a suspension process similar to Spark's to manufacture medicines, while BioMarin and UniQure have a manufacturing capacity that is five times that of Spark's.

Solid Biosciences' manufacturing "could yield more potent gene therapy that may appeal to some parties," Schwartz added.

Manufacturing capability, in addition to clinical data, would be an indicator of a gene therapy company's readiness for market, making it a more appealing acquisition, Schwartz said.

Dutch biotechnology company UniQure had actually brought the first gene therapy, a treatment for an ultra-rare genetic disorder, to European markets, but ultimately withdrew the product due to limited demand, opting instead to focus on other disease areas.

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Teeming therapeutic areas

Among the major gene therapy companies, which also include bluebird bio and Sarepta Therapeutics Inc., hematology and neuromuscular disorders are popular therapeutic areas.

Notably, these indications, like hemophilia, spinal muscular atrophy and muscular dystrophy, are rare diseases that would allow for relatively lighter pricing pressure, UBS analyst Jack Scannell said after Spark's acquisition.

"Relatively little clinical data/experience is needed to convince most hemophilia [patients] to adopt gene therapy," Leerink analysts found in a physician survey.

Stifel analyst Stephen Willey also noted the similarities between UniQure's pipeline and Spark's. According to Schwartz, UniQure's hemophilia B gene therapy, called AMT-061, closely mirrors Spark's hemophilia product candidate, SPK-9001, in effectiveness, but carries fewer serious risks.Both UniQure and BioMarin have programs in hemophilia — a "lucrative market," Schwartz said. BioMarin is expected to announce phase 3 data on its Valrox program for hemophilia A in mid-2019.

Roche developed and markets its own hemophilia A treatment, bispecific antibody Hemlibra, which would have faced competition from gene therapy prospects eventually, GlobalData analyst Tajekesa Chapman noted.

While Spark and Nightstar both have therapeutic focuses on ophthalmology, none of the four companies identified as possible targets have candidate for retinal disease products.

Vicente Anido Jr., CEO of Aerie Pharmaceuticals Inc. — an ophthalmology-focused company that Mizuho analyst Difei Yang had told S&P Global Market Intelligence may be an acquisition target — said Roche went after Spark for the latter's gene therapy and not so much for ophthalmology.

"But there is more and more interest in [ophthalmology]," Anido said.

Anido hypothesized that Takeda Pharmaceutical Co. Ltd.'s divestitures to reduce debt, including Shire PLC's ophthalmology assets, will be the "biggest thing on the block," and whoever acquires the ophthalmology business may provide some hints as to what companies will be taken over next.

Other gene therapy companies with ophthalmology programs include Johnson & Johnson-partnered MeiraGTx Holdings PLC, Homology Medicines Inc. and Regenxbio. Gene-editing drug developer Editas Medicine Inc. is also tapping the retinal disease space.

According to Leerink, UniQure said Roche's acquisition of Spark Therapeutics is a continued validation by big pharma of gene therapy, and deal-making is likely to continue.