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Gene Therapy Is Here To Stay: Should Bigger Companies Build, Buy, Or Partner?

Chief Business Officer

Deanna Petersen, MBA | Chief Business Officer

Gene therapy’s tremendous potential to transform the treatment of both rare and common diseases has been understood for decades. But few may appreciate how imminently that revolution is upon us. This summer, approvals on both sides of the Atlantic – for beta thalassemia and cerebral adrenoleukodystrophy in the United States and for severe hemophilia A and aromatic L-amino acid carboxylase deficiency in Europe – show that regulators are likely open to green-lighting a range of emerging gene therapies.

At the same time, there are more gene therapies in development overall than antibodies, with 39 Phase 3 trials ongoing and several companies expected to file for approvals over the next 12 months. The FDA’s Office of Therapeutic Products (formerly known as the Office of Tissues and Advanced Therapies until September) recently reported that it was overwhelmed with more than 3,000 IND applications for cell and gene therapies and plans to hire another 100 people over the next four to five years.  It may be a safe assumption that OTAT’s transformation into OTP, a so-called “super office,” was prompted in part by this burgeoning gene therapy wave.

I believe we’re seeing this level of activity because gene therapy has reached a tipping point. A range of questions and technical obstacles that once bedeviled the industry, from manufacturing and safety to durability and pricing, have gradually receded as companies have developed solutions and worked through issues with regulators, payors and other stakeholders. We now have an accumulation of data, regulatory milestones and patients whose lives have been dramatically changed to show that gene therapy is here, and here to stay.

The sector faces financial headwinds to be sure, but with this progress the opportunity exists for gene therapy to capture markets across an array of genetic diseases, as well as potential blockbuster indications like GBA-Parkinson’s and wet AMD. If you are a biopharma or large biotech company, and you do not currently have a gene therapy strategy or the internal know-how and capabilities to drive it forward, you are already in danger of never reaching – or worse, losing – your leadership position across a range of therapeutic areas. Now is the time to invest in this space — here are several factors to consider as you weigh your options.

Ingredients for success

When you think about it, success in gene therapy is not really dependent on patents and traditional drug development methodologies and functions. Success in gene therapy is much more dependent on know-how and speed to market. Because each patient treated is potentially functionally ‘cured,’ or as envisioned is treated only once, and, thus, no longer a candidate for treatment, the target population decreases with each patient dosed. This means whoever gets to market first starts depleting the number of patients available, which quickly makes the remaining market unattractive for potential competitors. In other words, the first company to market gains a tremendous market advantage. For rare diseases, whichever company gets to market first will also likely get orphan drug exclusivity, another important form of protection. This puts a premium on companies with a critical mass of know-how today and with real platforms that can more easily and quickly enable programs in different diseases by switching out the DNA construct.

This know-how and the assets and capabilities that come out of it cannot be built overnight. Gene therapy companies have spent the past five to 10 years developing the expertise and processes necessary to deliver their products to patients efficiently and effectively. Interestingly, one vendor recently told us that every single person they hired with ‘biologics’ capabilities eventually turned out not to have the right skill set for gene therapy. Because speed is the secret to success in this sector, it would not surprise me to see a flurry of partnerships and acquisitions as pharma and large biotech players position themselves to reap the benefits of gene therapy’s emergence. Certainly, the sector’s recent positive regulatory signals and robust pipeline are important parts of the equation, but there is also an important business distinction that sets gene therapy (and other one-time genomic medicines) apart from other products.

The revenue tsunami

If you are first to market with a gene therapy product, you don’t just have an edge on the competition – you quite possibly wipe out the competition. It’s a potential “winner take all” situation, and on top of that the majority of your revenues will be made quickly, in the first three to five years on the market, because each patient treated results in a one-time payment representing a substantial fraction of the lifetime value of the treatment. Rather than collecting incremental revenue with each dose delivered over a patient’s lifetime, gene therapy revenue essentially comes all at once.

Take Zynteglo (beti-cel), recently approved in the United States for the treatment of beta thalassemia. With a price tag of $2.8 million, it was the most expensive drug in history for just a few weeks before another gene therapy made by the same company entered the market at $3 million. But those figures pale when compared with the lifetime cost of treating a patient with a serious rare disease like beta thalassemia, which can easily exceed $6 million, or for Fabry disease, where it has been reported to exceed $14 million (Rombach S et al. OJRD. 2013). After making such comparisons in a report issued earlier this year, the nonprofit Institute for Clinical and Economic Review concluded that Zynteglo would be cost-effective for payors at its $2.8 million price.

Skeptics have correctly pointed out that once you have treated the majority of the patient population in a given indication, revenue from that particular product will fall substantially. But as I’ve explained in an earlier post, that’s not as big a problem as one might think. For one thing, even treating 400 patients at a price of $2.5 million yields $1 billion in revenue. But beyond that, the key to ongoing success is to have the expertise and platform, developed over long experience, which enable you potentially to move from one indication to the next. With each new indication, you have the potential to collect revenues on the scale of the total lifetime treatment cost of the majority of the patient population within a matter of years. Revenue opportunities like this have never existed in the history of the pharmaceutical world — until now. What pharmaceutical company executive wouldn’t want that opportunity?

When you look into the details, there are additional benefits to be had. In many cases, rare disease gene therapies are in development for diseases that are currently treated using a chronic regimen that has already saturated the market. That means patients may be easier to identify, and with clear gene therapy benefits such as reduced treatment burden and potentially more systemic symptom relief, the decision to switch from a chronic regimen to gene therapy will likely come down to familiarity and safety. Both of those issues can be expected to diminish as barriers as gene therapy becomes more common, which may not take long. All of these factors may mean less investment in sales and marketing will be needed to maximize gene therapy revenue.

No late entries

But I can’t say it enough: The key is having an experienced team and mature platform in place when the gene therapy era comes. Even if you were to start building a program from scratch today, existing players will have reaped the rewards of first-generation genetic disease indications and moved on to more common and, thus, potentially more lucrative applications before it had a chance to bear fruit. Gene therapy companies, and academic researchers before them, have spent decades developing the vectors, assays, manufacturing and other technology needed to deliver these treatments, as well as the expertise to keep moving forward as the field progresses. That accumulated know-how should not be discounted.

Today gene therapy stands on a strong foundation, with a recent wave of regulatory approvals and potentially more in the near future as positive clinical data accumulates across multiple programs. A growing number of patients’ lives have been forever changed by this technology, especially those who are able to be treated early in childhood, as that creates the opportunity to have potentially an entire lifetime freed from the consequences of genetic disease. The opportunity to dramatically transform the lives of more patients and families, as well as to dramatically change our healthcare system, is in our sights. The window is now open for pharma and biopharma to consolidate gene therapy expertise and capabilities through partnerships and acquisitions in order to propel themselves to leadership positions and drive this revolution forward, and to benefit from it as well.

Gene therapy is here to stay.  Speed matters.