$3 BILLION GENE THERAPY PLUNGE: ASTELLAS ACQUIRES AUDENTES THERAPEUTICS
Expanding Enterprise Biotherapeutic Categories
Key elements:
Astellas acquires Audentes Therapeutics for $3 billion
Audentes pipeline will help Astellas establish a clinical and commercial enterprise in gene therapy
With Audentes acquisition, Astellas will compete against blue-chip gene therapy leaders Novartis, Pfizer, Roche
Astellas ( OTCMKTS: ALPMY ) has announced it is acquiring Audentes Therapeutics ( NASDAQ: BOLD ) for $3 billion and plunges itself into the gene therapy market. Based in San Francisco, California, Audentes is a clinical-stage research company centering on the development of AAV-based genetic medicines for people with significant and rare neuromuscular diseases.
Astellas is a global leader in advanced pharmaceutical therapies
Astellas, based in Tokyo, Japan with a U.S. headquarters in Northbrook, Illinois, is Japan’s second-largest pharmaceutical company ( Takeda is ranked at number 1). The current product portfolio of Astellas is defined by 4 categories and the addition of Audentes will establish a 5th with the specialty of genetic therapy:
- Immuno-Oncology
- Immunotherapy
- Neuro-Muscular
- Regenerative
- Genetic Therapy
Astellas employs approximately 17,500 worldwide; Audentes has less than 1,000 staff members.
Audentes has developed a robust pipeline of advanced gene therapies
Audentes’ adeno associated virus ( AAV ) gene therapy technology platform and proprietary production process expertise are applied in programs spanning 3 modalities:
- Gene Replacement
- Vectorized Exon Skipping
- Vectorized RNA Knockdown
Audentes has committed significant resources to develop potential approval candidates although the risk remains high in terms of chances of approval by the Food and Drug Administration ( FDA ) in the United States and the government regulatory agencies of other nations:
- AT132 X-linked Myotubular Myopathy MTM1 (Gene Replacement)
- AT845 Pompe GAA ( Gene Replacement )
- AT702 Duchenne Muscular Dystrophy Exons 2, 1–5 (Vectorized Exon Skipping)
- AT751 Duchenne Muscular Dystrophy Exon 51 (Vectorized Exon Skipping)
- AT753 Duchenne Muscular Dystrophy Exon 53 (Vectorized Exon Skipping)
- AT466 Myotonic Dystrophy DMPK (Vectorized Exon Skipping / Vectorized RNA Knockdown)
Audentes already has submitted one gene therapy agent candidate to the Food and Drug Administration for approval
Presently, the leading candidate for approval in the Audentes portfolio is AT312 which could happen as early as mid-2020. Its clinical trial performance has generated good results in the treatment of X-linked myotubular myopathy (XLMTM) occurring primarily in male infants.
Astellas would be able to commit clinical, financial and commercial resources towards its launch upon its approval which could entail some expansion in its operations, marketing, sales and training units.
Astellas began exploring gene therapy marketplace in 2018
Astellas has already licensed a gene therapy candidate. In 2018 Astellas entered into a licensing agreement with Juventas Therapeutics for JVS-100. JVS-100 is a non-viral gene therapy expressed from stromal cell-derived factor -1 ( SDF-1 ) which is a naturally occurring signaling protein activating the endogenous tissue repair pathways.
Founded in 2007 and based in Cleveland, Ohio, Juventas is a private, clinical-stage biotechnology company developing novel non-viral gene therapies that activate natural processes. Their clinical indication specialties encompass dermal scar prevention, heart failure, peripheral artery disease and other areas of investigational research and development.
Gene therapy is a highly specialized area of medicine
Gene therapy is an advanced area of life sciences with the potential to cure diseases by replacing missing or mutated versions of a gene found in a patient’s cells with healthy copies. Depending on the patient and the genetic challenge involved, gene therapy in some instances can resolve significant illnesses with one dose.
Because of the advanced clinical technologies involved with developing and manufacturing gene therapies, they are quite costly and the processes to develop them are complex.
Biotech and pharmaceutical companies are seeking new business opportunities in more clinically complex, less crowded therapeutic categories
Large and mid-sized pharmaceutical companies and biotech firms are always seeking to build their clinical and commercial capabilities. Many prescription drug market sectors are crowded with the competition including:
- Allergy
- Antibiotics
- Cholesterol
- Dermatology
- Diabetes
- Gastraoesophogeal Reflux Disease ( GERD )
- Hypertension
- Oral Contraceptives
- Rheumatology
There are numerous brand and generic drugs in each of these categories. While the patient population prescribed these products is in the millions and the medications involved taken daily for months if not years, pharmaceutical companies devote large financial sums to develop these products and promote them.
Conversely, they frequently discount the products through market access strategy measures to contract for favorable positions on managed care organization ( MCO ), prescription benefit manager ( PBM ) and health system formularies or group purchasing organization ( GPO ) listings.
The risk versus reward equation in gene therapy and other niche biopharmaceutical categories
While gene therapy and other advanced medications are costly and risky to produce, the investment to promote them following approval is less. The payout is larger as there are fewer competitors due to their high research & development and production costs which are barriers of entry for many drug manufacturers not able to afford the high investment costs and potentially long periods leading to payoff upon product approvals and launch.
The narrow indications gene therapies are approved for and the reduced number of patients they are prescribed to results in significantly higher prices at the time of launch as there are fewer opportunities for product innovators to make back the money they have invested.
Astellas is highly selective in its acquisition strategy
It has been almost 10 years since Astellas last made such a sizable acquisition. In 2010, Astellas acquire OSI Pharmaceuticals for $3.8 billion. With annual sales of approximately $12 billion and a market capitalization estimated at $33 billion, Astellas is solidly established in global healthcare markets and has the clinical and financial resources to cultivate a successful gene therapy portfolio of products.
Astellas versus the competition in the gene therapy marketplace
By adding Audentes’ research & development attributes and manufacturing capabilities plus its connections with patient groups, academic institutions and the biotech research community, Astellas assertively positions itself in the expanding gene therapy marketplace.
Three companies, Roche ( OTCMKTS: RHHBY ), Novartis ( NYSE: NVS ) and Pfizer ( NYSE: PFE ) are presently the blue-chip pharmaceutical manufacturer leaders in gene therapy. Roche acquired gene therapy company Spark Therapeutics for $4.8 billion in 2019, Novartis bought up AveXis, another gene therapy leader, for $8.7 billion. Among Pfizer’s many investments, they acquired gene therapy producer Bamboo Therapeutics for $645 million in 2016.
Reportedly Pfizer and Novartis have been hard at work building out their gene therapy development and manufacturing capabilities. Pfizer has allocated about $600 million to gene therapy production and Novartis slightly less at $500 million.
Potential gene therapy giants that may become acquisition targets for other drug manufacturers seeking to enter the gene therapy market
Upcoming gene therapy companies, which could substantially grow on their own if their pipeline candidates are approved, may also be attractive buyout targets. Some of the leading gene therapy companies of this caliber include:
- FerGene (Ferring Pharmaceuticals / Blackstone Life Sciences joint venture)
- MeiraGTx Holdings PLC (NASDAQ: MGTX )
- Regenxbio Inc. ( NASDAQ: RGNX )
- Sarepta Therapeutics Inc. ( NASDAQ: SRPT )
- Solid Biosciences Inc. ( NASDAQ: SLDB )
- uniQure NV ( NASDAQ: QURE )
- Voyager Therapeutics Inc. ( NASDAQ: VYGR )
While it appears there are numerous contenders in the gene therapy market, the fact remains their products are highly niche-focused so they have less or no competition within each of the therapeutic areas they are exploring to develop new medicines. The high rate of clinical trial failure also results in an ongoing reduction of competing agents throughout the product development cycle.
Drug manufacturers seek to avoid large financial outlays and risk involved with gene therapy and other biotherapy product development
Many large and mid-sized companies owned by the investment community prefer to have smaller, highly-focused companies develop products like gene therapies first. As they progress through the approval process, the pharma companies either license or buy outright the product or the firm when approval by regulators seems imminent.
In advance, these companies may partially fund the research necessary to develop the products. Audentes provides Astellas with a solid candidate to enter the gene therapy market and hopefully generate other products in the future.
Astellas and Audentes deal approval and product approval timelines
Even before the Astellas and Audentes deal is approved by regulators, the approval of AT132 X-linked Myotubular Myopathy MTM1 ( Gene Replacement ) will be highly anticipated by investors, company staff members and the medical community. Depending on when the deal is approved and AT132 is approved, a combined torrent of activity will follow.
Astellas and Audentes could be working to integrate their organizational structures and launching a strategic product venture at the same time. As 2020 rapidly approaches, each company has much to accomplish and look forward to.
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