Gene therapy progress spurs competition in biotech buyouts
- Drugmakers looking to buy their way into gene therapy are finding healthy competition for promising biotechs, regulatory filings from recent takeovers show, underscoring the renewed momentum behind a field seeking one-time treatments for genetic diseases.
- Most recently, retinal disease specialist Nightstar Therapeutics fielded interest over the course of seven months from four drugmakers, including Biogen, before eventually agreeing to a twice-revised offer from the big biotech that valued Nightstar at $25.50 per share, or roughly $800 million.
- As in the case of Roche's $4.8 billion takeover of Spark Therapeutics last month and Novartis' $8.7 billion buy of AveXis last year, competing bids drove up the price eventually paid to secure each gene therapy developer.
Nightstar is the third gene therapy-focused biotech to be acquired by a larger drugmaker since the landmark approval in late 2017 of Spark Therapeutics' Luxturna (voertigene neparvovec) — the first gene therapy for an inherited disease to be OK'd in the U.S.
In each case, regulatory filings show multiple parties were interested in a takeover or partnership. That's not always a given, even in therapeutic areas like oncology that are currently attracting surging levels of drugmaker investment.
For example, Tesaro, a cancer biotech with an approved drug on the market, received only one formal takeover bid during a roughly 18-month period in which the company was reviewing strategic alternatives. That bid, from GlaxoSmithKline, ended up securing what became a $5.1 billion deal.
Similarly, Eli Lilly submitted the only bid to buy Loxo Oncology, although the pharma's push to complete a deal in a roughly two-week timeline could disguise broader buyout interest in Loxo.
In both the case of AveXis and Spark, competing bids appear to have helped drive up the price eventually paid by Novartis and Roche, respectively.
Competition for gene therapy buyouts yields hefty premiums
|Takeout price (total value)||Premium over prior day's close||# of interested parties|
|Novartis-AveXis||$218 per share ($8.7 billion)||88%||3 (incl. offers from all 3)|
|Roche-Spark||$114.50 per share ($4.8 billion)||120%||2* (incl. offers from both)|
|Biogen-Nightstar||$25.50 per share ($800 million)||68%||4 (incl. offers from 2)|
*A third proposed a collaboration with $450 million upfront SOURCE: SEC filings
For Nightstar, only two of the four companies interested in a deal put forward a proposal. After receiving in mid-December an offer of $20.50 per share from the undisclosed "Company B," Nightstar management reached out to Biogen and two others, companies A and C, to gauge their interest in an evaluation process for a buyout.
Biogen later proposed an acquisition at a price between $19 and $21 per share in cash, which Nightstar spurned as "well below the stand-alone value of the business."
For unspecified reasons, however, companies B and C dropped out of discussions regarding a potential takeover, although company B remained interested in a potential strategic partnership.
Nightstar successfully pushed Biogen to increase its second offer of $25 per share, agreeing to a buyout offer at $25.50 per share on March 3.
"[Biogen] may have felt the need to pull the trigger before a more competitive bidding process ensued," wrote SVB Leerink analyst Joseph Schwartz in a note to clients on March 4, the day the deal was announced. He cited Roche's recent acquisition of Spark and a collaboration between Johnson & Johnson and MeiraGTx as potential motivating factors.
Industry interest notwithstanding, the commercial prospects for gene therapy are still unclear. Spark's Luxturna, by most accounts, has had a tepid start on the market, recording $27 million in net product sales for the inherited retinal disease treatment in 2018.
The market for Luxturna is small, with only between 1,000 and 2,000 patients estimated to be affected by the disease it's approved to treat, known as RPE65 mutation-associated retinal dystrophy. Yet it faces hurdles, such as reimbursement and manufacturing, that are likely to slow commercial uptake of other gene therapies to enter the U.S. market after it.
Novartis could be next up: A decision from the Food and Drug Administration on Zolgensma (onasemnogene abeparvovec), the treatment it acquired in its deal for AveXis, is expected by May.
Such commercial uncertainties are reflected in the broad range of forecasts Nightstar management assembled internally for its pipeline of retinal disease gene therapies.
By 2024, Nightstar expects total company sales could range from anywhere between $415 million to $1.1 billion, depending on how the company's assumptions pan out.
Nightstar's pipeline contains two gene therapies in clinical testing: NSR-REP1 for choroideremia, which is currently in Phase 3, and NSR-RPGR for X-linked retinitis pigmentosa, which began Phase 2/3 testing in March. Analysts view the treatments as still between two and four years away from potential commercialization.
- BioPharma Dive Biogen buys Nightstar in search of more eye gene therapies
- BioPharma Dive Roche outbid competing biopharma to secure Spark deal
- BioPharma Dive A flashy 2019 start to pharma M&A, but will it last?
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