How cell and gene therapies are driving new deals in life sciences

After years of often slow and challenging progress, many promising cell and gene therapies are coming of age. Several products have now been approved and others are advancing toward late-stage clinical development. Many of these therapies bring the prospect of strong efficacy and even curative benefit, often in disease areas that have limited or no treatment options available.

Given the rate of recent progress, many leaders in the life sciences sector expect cell and gene therapies to be broadly available to patients and clinicians within the next three to ten years. Based on their significant clinical and commercial potential, these therapies are often referred to as ‘magic bullets’, reminiscent of the terms used to describe the first generation of monoclonal antibodies (mAbs) introduced 20 to 25 years ago. There is strong consensus that cell and gene therapies will represent significant advances in standard of care for a range of conditions, including rare diseases, and the growing enthusiasm is driving a focus on innovative deal- making for these products.

A new era in deal-making

Along with patient communities and global healthcare systems, pharmaceutical companies are recognising the potential benefits and commercial opportunities in cell and gene therapies. Both larger and smaller companies are actively pursuing collaborations, mergers, acquisitions and licensing agreements for these drugs, with the number and size of deals ramping up rapidly in recent years. From 2010-2016 alone, pharmaceutical companies executed more than 50 partnerships and investments to access cell and gene therapies.

As they consider deals, pharmaceutical companies and other acquirers are working to understand the inherent uncertainties and risks presented by many cell and gene therapies. In many cases, these drugs must be assessed based on limited safety and efficacy data from small patient populations. They also often have high price tags and short-window dosing schedules that make the standard pricing models for small molecules and mAbs unworkable. To better understand how deals for cell and gene therapies are being structured, we reviewed more than 30 recent mergers, acquisitions and licensing agreements executed worldwide and compared them to deals executed for mAbs between 1999-2013. Findings showed that the pace of deal-making for cell and gene therapies is overall faster and occurring much earlier in the clinical development process compared to deals historically seen for mAbs, with big pharma clearly eager to establish an early presence in the sector.

Emerging strategies in deal-making

When the first mAbs were approved in the mid-1980s, collaborations and licensing deals were predominantly among smaller biotechnology firms. It took about two more decades of proof of concept for big pharma to show significant interest in acquiring these drugs, a reflection of the conservative nature of investing by larger and more established companies. In the case of cell and gene therapies, big pharma has opted to move in much earlier and more aggressively. The pace of deals in the sector has gained momentum quickly since the approval of the first cell and gene therapies in the early 2010s. In 2016, 44% of all cell and gene therapy deals involved big pharma; this figure jumped to 60% by 2018. Companies including GlaxoSmithKline, Celgene, Novartis and Pfizer are among those who have pursued cell and gene therapy-related acquisitions and collaborations. With mAbs, the largest deals were often characterised by acquisitions of late-stage and commercial-stage products. One especially noteworthy finding from our analysis is that most major cell and gene therapy acquisitions involve earlier stage product pipelines, platform technologies and manufacturing capabilities rather than just a single late-stage asset.

Another key finding from the analysis is that companies are considering deals for cell and gene therapies earlier in the drug development cycle, with a higher proportion of partnerships involving Phase I or even preclinical stage assets. For example, Pfizer’s first move into the cell and gene therapy sector was through a collaboration for the development and potential commercialisation of Spark Therapeutics’ Phase I/II gene therapy for haemophilia B. Subsequent efforts at Pfizer to expand its cell and gene therapy portfolio included the acquisition of Bamboo Therapeutics in 2016, which provided one Phase I and several preclinical stage assets, and a partnership with Vivet Therapeutics initiated in 2019 on the development of a Phase I/ II drug for treatment of a rare liver disease.

The focus on innovative earlier stage cell and gene therapies means that companies must proceed with deals carefully to reduce risk. There are often multiple unique factors associated with these therapies that can affect their development timelines, regulatory requirements and commercial potential, including novel clinical trial protocols, limited safety and efficacy data, high upfront costs, smaller target populations, and costly and complex manufacturing requirements. Given these considerations and uncertainties, deals in the sector are shifting from straightforward mergers or acquisitions to innovatively structured licensing and collaboration agreements. Many collaborative arrangements work to help a company acquire cell and gene therapy assets without assuming full financial responsibility. They also reduce the risk of possible disruptions in business operations and productivity, as often seen after M&A deals when companies are forced to restructure their resources and teams.

Another novel feature is the fact that collaborative deals for cell and gene therapies are often structured to allow one party in the deal to access complementary business capabilities held by the other party. Collaborations may be driven by access to advanced or customised technologies in manufacturing, especially when production reaches a larger scale, or for specialised expertise in a specific indication. The partnership between Neurocrine Bioscience and Voyager Therapeutics reflects this type of synergistic collaboration. Under the terms of the agreement, Neurocrine provides CNS drug development expertise and financial support for the clinical development of gene therapies for Parkinson’s disease and Friedreich’s ataxia. In return, Neurocrine is able to co-commercialise and potentially obtain global rights to portfolio-compatible therapies.

More deals on the horizon

The number of clinical research and development programmes in cell and gene therapy will likely grow exponentially in the years ahead. With a pending wave of advances in research coming, industry insiders expect that the level of interest in deal-making in the sector will continue to accelerate and that the structures and values of deals for these products and technologies will also mature.

Based on the results of our analysis, more companies are likely to exercise the option to follow up on previously agreed-upon collaboration deals, potentially leading to an increase in the number of large-scale licensing agreements and acquisitions. Companies will also seek out expertise in manufacturing to meet product demand at every stage and plan for production needs earlier in the drug development cycle. In the first half of 2019, three contract development and manufacturing organisations (CDMOs) with capabilities in cell and gene therapy production were acquired by major industry players. New pricing and reimbursement models will also emerge to support the generation of high-cost cell and gene therapies on the horizon.

Cell and gene therapy technology is still relatively new, and access to the specialised expertise and technology necessary to support production and commercialisation will remain limited as more companies buy into the sector. This will, in turn, drive many efforts to collaborate and share professional services, technologies and best practices among stakeholders. As a result, we are also likely to see new levels of collaboration and information sharing among research centres, manufacturers, payers, providers and regulatory agencies to prepare for the anticipated launch of additional promising therapies, potentially in rapid succession.

Lev Gerlovin is a vice president in the Life Sciences Practice at CRA. Pascale Diesel previously served as a vice president in the Life Sciences Practice at CRA from July 2017 through December 2019. Views expressed herein are the authors’ and not those of Charles River Associates (CRA) or any of the organisations with which the authors are affiliated. The authors wish to acknowledge the contributions of Súil Collins and Alex David to this article