Barron's cover story: Big Pharma is diving into gene therapy
Big Pharma has been struggling for years to produce drugs that are major breakthroughs in medicine. For these companies, gene therapy may be the promised land.
“Big drug companies are waking up and saying this is a real technology and that they need to be there,” says Marshall Gordon, senior research analyst at ClearBridge Investments, an active equity manager based in New York. Another hurdle to come is the stratospheric prices these treatments will command. Spark’s therapy is priced at $850,000. Novartis has suggested that its spinal muscular atrophy treatment could cost $4 million. At those prices, it doesn’t take a lot of patients to have a lucrative drug—plus the prestige of potentially curing serious or fatal conditions. The price tags, however, could also provoke a pushback from private insurers and programs like Medicare.There are plenty of risks, to be sure.
Other pure plays include Audentes Therapeutics , Solid Biosciences , MeiraGTx Holdings , and Voyager Therapeutics . None of these is big; the largest, uniQure, is valued at $2 billion. The stocks aren’t cheap based on conventional financial analysis. The pure-play companies have little or no revenues and generally steep losses. Wall Street evaluates them based on the sales potential of their treatments as well as franchise value, including manufacturing capabilities, which are critical in gene therapy because the treatments are among the most difficult and expensive to produce in the industry.
Genes in Fashion A number of gene therapy biotech companies have been acquired in recent years. Replacement gene therapy generally targets so-called monogenic diseases like Duchenne muscular dystrophy or hemophilia that are caused by the absence or severe deficiency of a critical protein—the result of a defective gene that fails to code for the production of that protein. Some of these diseases lack treatments entirely or have ones with limited effectiveness.
The treatments are designed to be administered once, because the body develops an immune response to the viral vectors that carry the healthy genes. As a result, the treatments generally involve doses of trillions of neutered viruses that pose manufacturing challenges as well as the risk of patient toxicity. That goes a long way to explain the sky-high prices for these treatments.
UniQure has doubled so far this year, to $55, but there could be upside in a deal or commercial success. Amusa of Chardan Capital has a price target of $70. H.C. Wainwright analyst Debjit Chattopadhyay estimates that the uniQure hemophilia B treatment could generate sales of more than $1 billion annually at about $850,000 per patient if approved.
Audentes’ main treatment targets X-linked myotubular myopathy, or XLMTM, a fatal muscle condition, and it also has a therapy for the ultrarare Crigler-Najjar, a serious disease that results from the body’s inability to process bilirubin, which is formed from the natural breakdown of red blood cells. Audentes reported in October “meaningful improvements in neuromuscular and respiratory function” in an early-stage trial involving seven XLMTM patients.
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