Biogen’s biggest recent foray into gene therapy, an ill-fated pact with AGTC, didn’t pay dividends. So the company this morning agreed to buy a rival, Nightstar Therapeutics, and its portfolio of gene therapies for rare eye diseases, for $800 million.
Biogen (NASDAQ: [[ticker:BIIB]]) this morning agreed to pay $25.50 per share in cash for Nightstar (NASDAQ: [[ticker:NITE]]), a roughly 65 percent premium to the Waltham, MA, and London-based company’s $15.91 closing price on Friday. Nightstar went public in September 2017 at $14 per share.
The deal gives Biogen two experimental gene therapies in mid and late-stage human testing: NSR-REP1, a potential treatment for choroideremia, a rare, degenerative, retinal disease; and NSR-RPGR, for x-linked retinitis pigmentosa, another disease that causes vision loss. Nightstar has other treatments for rare eye disorders like Stargardt’s disease and Best vitelliform macular dystrophy that are in animal testing.
The buyout should close by mid-2019.
The deal marks yet another big investment by large biopharma companies in gene therapy, which offers the potential for a long-lasting, if not permanent effect through a one-time treatment. The field has gone through decades of ups and downs but has now proven that it can develop approved marketed products. Several are on the way.
These products, however, face significant commercial questions. The first commercial gene therapy in the Western World, uniQure’s (NASDAQ: [[ticker:QURE]]) Glybera, approved in Europe in 2012, was pulled from the market five years later. GlaxoSmithKline (NYSE: GSK) sold off the second, Strimvelis, to Orchard Therapeutics in a restructuring after sales disappointed as well. And the first gene therapy approved in the U.S., Luxturna from Spark Therapeutics (NASDAQ: [[ticker:ONCE]]), generated $27 million in 2018.
It’s unclear how long the therapeutic effect of these products will last, or whether they can succeed in a U.S. healthcare system that is set up to cover chronic medications—not high-priced, one-time treatments meant to last for years, if not for life. Spark was the first in the U.S. to try to tackle these questions. After floating a potential $1 million-plus price tag for Luxturna, which treats a rare form of inherited vision loss, it decided to charge $425,000-per-eye for Luxturna and cut a deal with New England insurer Harvard Pilgrim Health Care on a plan that included rebates tied to the drug’s durability. Other companies with gene therapies close to market, Bluebird Bio (NASDAQ: [[ticker:BLUE]]), and Novartis (NYSE: [[ticker:NVS]]), have already talked up annuity-based payment plans for gene therapy to cover their high price tags.
Indeed, increasingly, biopharma companies are betting more and more that that these issues will be figured out, and are buying gene therapy companies as a result. Novartis paid $8.7 billion to buy AveXis last year to get its hands on what should be the next approved gene therapy, for spinal muscular atrophy. Roche last week agreed to buy Spark Therapeutics for $4.8 billion. Johnson & Johnson (NYSE: [[ticker:JNJ]]) formed an alliance with MeiraGTx (NYSE: [[ticker:JNJ]]), to develop gene therapies for eye diseases, signaling the start of a deeper move into the field. And companies like Sarepta Therapeutics (NASDAQ: [[ticker:SRPT]]), Amicus Therapeutics (NASDAQ: [[ticker:FOLD]]), and others have been acquiring gene therapy programs over the past few years. With products for hemophilia, SMA, Duchenne muscular dystrophy, hemophilia, and more nearing regulatory review, the FDA has even recently announced long-term plans to accommodate the surge in expected approval filings for gene therapies.
SVB Leerink analyst Joseph Schwartz believes the recent spate of gene therapy deals is a sign of things to come. “Reminiscent of the early days of biologics that have proved to be a fertile environment for transactions, we see a similar pattern play out with gene therapy,” Schwartz wrote in a note to investors. “With continued clinical validations across numerous genetic diseases and sponsors diligently building proprietary expertise not only designing the construct and drug delivery, but also building in-house manufacturing capability to support their endeavors, we think other acquisitions could emerge on the heels of [Biogen/Nightstar].”
Schwartz specifically pointed to gene therapy developers uniQure and Audentes Therapeutics (NASDAQ: [[ticker:BOLD]]) as “likely targets” given their manufacturing expertise and the promising clinical results they’ve shown in hemophilia and neuromuscular diseases, respectively.
Biogen was one of several companies to bail on gene therapy during the field’s dark days, but it has shown increasing interest in the field over the past few years, starting with a decision to form a gene therapy unit within the company in 2014. Its biggest splash since then was a wide-ranging alliance with AGTC (NASDAQ: [[ticker:AGTC]]) to develop gene therapies for rare eye diseases—among them X-linked retinitis pigmentosa. But that partnership didn’t bear fruit; a December clinical failure for AGTC’s most advanced gene therapy led Biogen to terminate the alliance and punt rights to five gene therapy programs back to the company.
In buying Nightstar, Biogen is making a similar bet on products for inherited forms of vision loss, starting with NSR-REP1, which should produce Phase 3 data in late 2020. Ophthalmology is “an emerging growth area for Biogen,” CEO Michel Vounatsos said in a statement. (The Nightstar buyout may also pit Biogen against Roche: Spark, too, is developing a gene therapy for choroideremia in early-stage testing.)
The deal marks the biggest outright acquisition by Biogen for some time. The pressure has been ratcheting up on the company to make a big splash for years because much of the company’s future fortunes currently rest with the ongoing Phase 3 trial of Alzheimer’s disease drug aducanumab. While aducanumab has shown promise in early tests, the list of Phase 3 Alzheimer’s failures is vast and has gotten longer each year. Yet Biogen has largely focused on placing smaller bets—like buying individual drugs for stroke, or broadening an existing alliance with Ionis Pharmaceuticals (NASDAQ: [[ticker:IONS]]).
Biogen shares ticked up about 2 percent in pre-market trading. The company will hold a conference call this morning to discuss the deal.
