Creating a toolbox — that's how Vertex CEO Jeffrey Leiden sees business development.
While best known for small-molecule drugs, the Boston biotech has been an uncharacteristically active dealmaker over the last few months as executives outfitted its toolbox with more advanced technologies. Since June, Vertex has expanded a partnership with CRISPR Therapeutics and agreed to buy two companies — one focused on gene editing, the other on stem cell-based therapies.
More, potentially larger M&A remains on the table, as Leiden acknowledges there are areas that warrant further investment from Vertex. Gene therapy, which describes a different approach than gene editing, is one such example.
"It wouldn't be unreasonable to expect us to do one or more gene therapy deals," he said in an interview with BioPharma Dive.
Filling the gaps
Analysts view gene therapy as the next logical tool for Vertex to pursue. Though still new, recent regulatory approvals and multi-billion acquisitions paint it as a more intermediate technology compared to gene-editing or the messenger RNA approach used by Moderna Therapeutics.
"It's almost like Vertex has gone from small molecules, and skipped over biologics, skipped over antisense and RNAi, skipped over AAV-based gene therapy, and gotten all the way down to the next-generation modalities like mRNA therapy with Moderna and CRISPR with CRISPR Therapeutics," Stifel analyst Paul Matteis told BioPharma Dive.
Leiden couldn't comment on potential acquisitions, but noted that any deal Vertex makes will rely on promising data in at least one of the roughly 20 illnesses Vertex aims to address. That list hasn't been fully disclosed, but it's known to include sickle cell disease, beta thalassemia, pain, myotonic dystrophy Type 1, Duchenne muscular dystrophy and alpha-1 antitrypsin deficiency.
With such a wide net, Wall Street analysts have found it difficult predicting exactly what Vertex would buy.
It's "harder to delineate" the organs or diseases Vertex will go after compared to other drugmakers, Cowen & Co.'s Phil Nadeau told BioPharma Dive. "They're kind of all over the map." he said. "The theme is that the disease process is very well understood."
Leiden has offered some clues regarding the size and scope of Vertex's M&A ambitions. He reaffirmed that the company isn't interested in late-stage or marketed therapies, and expects to do more deals like Exonics Therapeutics or Semma Therapeutics — those two acquisitions in the works, which are each valued at around $1 billion.
That's not to say bigger deals aren't possible, as Vertex held $4 billion in cash and cash equivalents not long before the Semma deal announcement. The company also has no debt, but isn't afraid to take on some according to Leiden.
Brian Skorney, an analyst at Robert W. Baird & Co., argues that $10 billion is likely the upper limit for any deal it would consider. While Sarepta Therapeutics would make for a good fit, Skorney said, he cautioned it's probably too big a target.
"I don't necessarily see them turning around and buying a CRISPR, buying a Moderna unless these programs materialize some fantastic data in a really rapid fashion," he told BioPharma Dive.
Skorney wouldn't be shocked, however, to see Vertex acquire something similar to Sarepta yet smaller, along the lines of rare disease biotech Amicus Therapeutics.
Amicus itself likely wouldn't meet Vertex's acquisition standards. It has one marketed product and another therapy in late-stage testing, as well as a market cap of nearly $2.4 billion.
Yet if Vertex wants access to gene therapy, or technologies like antisense oligonucleotides, it may have to commit more money than it's used to. A partnership announced in January between Neurocrine Biosciences and gene therapy developer Voyager Therapeutics includes a $165 million upfront payment and as much as $1.7 billion in milestones.
At least two recent deals centered around antisense oligonucleotides, which treat diseases via RNA interference, or RNAi, were valued at approximately $1 billion.
"That's because RNAi is a lot more validated than CRISPR," Stifel's Matteis said.
A good problem to have
Investor focus on M&A may disguise the fact that Vertex has one of the clearest growth trajectories in biotech.
The company owns three marketed treatments for cystic fibrosis that, combined, brought in more than $3 billion last year. Revenue should grow further with the expected 2020 approval of a triple-drug regimen that will allow up to 90% of cystic fibrosis patients to receive a Vertex product, according to company estimates.
While Vertex plans on developing a gene therapy for the remaining 10% of that population, shareholders are eager to know the next target as the company's work in cystic fibrosis winds down.
"It's a testament to just how strong their foothold is in CF; there's not really a lot for investors to debate right now on the triple launch," Matteis said. "Ultimately, for investors to think that they can make a lot of money on an event, there almost needs to be a debate."
Analysts expect Vertex will continue to concentrate its research and investments on monogenic diseases like cystic fibrosis, which are caused by defects in a single gene.
On the company's most recent earnings call, executives touted how they would have Phase 2 proof-of-concept data on an alpha-1 antitrypsin therapy by next year. Vertex's R&D head Reshma Kewalramani, who is positioned to take over as CEO, also seemed excited about a new pipeline program for kidney diseases brought on by mutations in a gene called APOL1.
Vertex isn't limiting itself to one branch of diseases, however, nor is its sole M&A focus gene therapies. The planned acquisition of Semma revolves around preclinical, stem cell-based treatments that may be able to cure Type 1 diabetes, a disease tied to multiple genes.
The deal appeared to take Geoffrey Porges of SVB Leerink by surprise, as he wrote in a Sept. 3 investor note that diabetes "seems a long way from the company's traditional target biology and small-molecule chemistry capabilities."
Leiden counters that Vertex has been interested in Type 1 diabetes for three or four years, and that the disease — which affects more than 1.2 million people in the U.S. — fits the company's specialty drug model.
"We are not a therapeutic area company. In other words, because we work in cystic fibrosis, it doesn't mean we work in other respiratory diseases like asthma or COPD," he said. "That's an old pharma model still espoused by some analysts."
Leiden will hand over the Vertex reins to Kewalramani in April 2020. In the interim eight months, he doesn't feel a need to rush M&A.
"We won't ... do deals for deals sake, or do deals because we have a lot of cash on our balance sheet," he said.
If deals do materialize, their structure will depend on the target.
As has been the case with other big drugmakers, Leiden envisions letting acquired companies operate more independently if they have expertise or knowledge in an area Vertex doesn't. Semma, for example, will have more autonomy because of the confidence Vertex has in the private company's leadership team.