Biogen buys Nightstar in search of more eye gene therapies
- Eyeing a deeper pipeline of ophthalmology gene therapies, Biogen said Monday it intends to acquire Nightstar Therapeutics for roughly $800 million.
- U.K.-based Nightstar has in its arsenal seven investigational therapies for inherited retinal diseases. The most advanced are NSR-REP1, which is in Phase 3 testing for choroideremia, and NSR-RPGR, which is in a Phase 2/3 expansion study for X-linked retinitis pigmentosa (XLRP). Biogen claims that both therapies could launch in the early 2020s as first-in-class treatments for their respective diseases.
- The big biotech agreed to pay $25.50 in cash for each Nightstar share, representing a 68% premium on the target relative to its closing stock price Friday. The companies expect the deal to close sometime in the middle of 2019.
Biogen sees itself diversifying its neuroscience business in the coming years. One focus in that pursuit is ophthalmology — a therapeutic area which has been difficult to conquer for many drugmakers. Case in point: Biogen in December exited a collaboration with gene therapy developer AGTC after one of its candidates posted disappointing data in a trial of X-linked retinoschisis patients.
The miss with AGTC apparently hasn't deterred the big biotech, though, as it is now betting on Nightstar to build a stronger position in eye disease gene therapies. Jeff Capello, Biogen's chief financial officer, noted on a Monday investor call that the patient populations for choroideremia and XLRP are around 15,000 and 20,000, respectively.
"These are sizable numbers of patients, and so we think there's going to be meaningful opportunity here commercially for us," Capello said. Biogen leadership also estimated that at least 30% to 40% of the choroideremia population could benefit from NSR-REP1 should it ultimately gain regulatory approval.
Yet such an approval isn't guaranteed — and, for some, isn't expected. Mizuho conducted a Biogen investor survey on the heels of the Nightstar acquisition and found that, among 26 responders, the weighted average for NSR-REP1's probability of success through approval was 37%. It was lower, at 33%, for Nightstar's XLRP therapy.
"[Biogen] management need to share the assumptions that drive their conviction that this will generate an acceptable return on invested capital for shareholders who own the company," unlike what has happened thus far in other cell and gene therapy acquisitions, wrote one survey responder.
Management noted on the Monday investor call, however, that the deal was part of its approach to capital allocation, and that it expects return on invested capital will exceed Biogen's weighted average cost of capital in a "reasonable time period."
Biogen is also counting on a supportive regulatory environment within ophthalmology.
"There is quite a lot of flexibility or ongoing dialogue with regulators around the right endpoints for registration across ophthalmology, particularly in retinal diseases," Michael Ehlers, head of Biogen's R&D, said during the call.
"History with FDA and relevant offices have indicated that they are very willing to look at secondary endpoints, other additional endpoints that are clinically meaningful," Ehlers said, adding that endpoints and trial design will be part of ongoing discussions with regulatory bodies as researchers collect full data sets on NSR-REP1.
Leadership did note that Nightstar's adeno-associated virus technology platform wouldn't be used broadly within Biogen, but instead stay rooted in ophthalmology indications.
As for whether Biogen would pursue additional M&A, Capello said the company would continue to be quite disciplined in how it uses cash for dealmaking.
"I wouldn't want to pen us into a size-of-the-deal conversation, we're just looking to kind of grow shareholder value over time," he said.
Biogen recorded in its latest annual filing $4.9 billion in cash, cash equivalents and marketable securities as of Dec. 31. The company's stock was down almost 2% by noon Monday.
Notably, the Nightstar deal comes just a week after Roche agreed to shell out $4.8 billion to acquire Spark Therapeutics, a gene therapy developer which also works in the inherited retinal disease space.
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