Cell & Gene Therapy Deals: Emerging Trends To Watch

The pace of deal-making in cell and gene therapy is faster and occurring much earlier in the drug development process compared to what has historically been seen for other innovative therapies. From 2010 to 2016 alone, companies executed more than 50 partnerships and investments in efforts to access promising cell and gene therapies.¹ The attraction to opportunities involving cell and gene therapies might be considered unsurprising given their promise of strong efficacy and in some cases potentially curative benefit, coupled with the fact that they often target diseases that have limited or no treatment options available. But as the pace of deal-making accelerates, the unique qualities of these therapies are also requiring dealmakers on both sides to consider innovative and previously untried strategies designed to optimize returns and reduce risk. They are structuring deals to address many factors, including the lack of commercial benchmarks and long-term safety and efficacy data often associated with these products.

To understand how the deal-making landscape is evolving, we reviewed more than 30 deals in the sector and compared them to deals that were executed for monoclonal antibodies (mAbs) between 1999 and 2013. In this analysis, we considered a range of factors, including the size of the companies involved, target indications, terms such as up-front payments and royalties, and the number and clinical stage of assets included in each deal. There is strong consensus that many cell and gene therapies will represent significant advances in standard of care for a range of challenging diseases and conditions, including many rare diseases, and that deal-making for these therapies will grow exponentially in the years ahead.

Efforts To Establish An Early Presence

Looking back at deal-making trends for mAbs, collaborations and licensing agreements were predominantly between smaller biotechnology companies. It took about 20 years for Big Pharma to show significant interest in acquiring these products and for the number and size of deals to ramp up following approval of the first mAb in the mid-1980s. Conversely, deals within the cell and gene therapy sector have been executed at a much faster pace, quickly building in momentum since the first products were approved in the early 2010s.

Deal-making activity in cell and gene therapy took a major step forward in 2010 with a partnership worth potentially $213 million (excluding royalties) between Novartis and GenVec regarding the clinical development of adenovirus-based gene therapies. That same year, Novartis also engaged in a deal with GlaxoSmithKline and the Telethon Institute of Gene Therapy to pursue additional gene therapy research and development programs. Since then, the pace of deal-making has continued to accelerate, with more larger companies, including Novartis, betting on the potential value of these therapies and trying to establish an early leadership position in this promising sector.

Pursuing Different Types Of Deals

While Big Pharma is actively targeting cell and gene therapies, the structures and values of these deals have shifted compared to deals for earlier advances, including mAbs. Our analysis shows that even at the height of interest in mAbs, most deals in this sector were characterized by the acquisitions of single late-stage or commercial-stage assets — evidence that larger and more established pharmaceutical companies were looking for later-stage products with established safety and efficacy profiles. In the cell and gene therapy sector, most major acquisitions have been for product pipelines, platform technologies, and manufacturing capabilities with the potential to deliver significant clinical and commercial value in the longer term. In addition, a large percentage of executed deals involve Phase 1 or even preclinical stage assets — sometimes several in one deal, as seen with Pfizer’s acquisition of Bamboo Therapeutics in 2016, which involved multiple therapies for rare diseases impacting the nervous system.

Another factor driving interest in innovative cell and gene therapy deals is the opportunity to access complementary business capabilities. One example of this type of synergistic collaboration is seen in the partnership established between Neurocrine Biosciences and Voyager Therapeutics in early 2019. Under the agreement, Neurocrine provides Voyager with expertise in clinical development of therapies targeting the central nervous system (CNS) and financial support for the development of gene therapies for Parkinson’s disease and Friedreich’s ataxia. Concurrently, Neurocrine gains the opportunity to co-commercialize and potentially obtain global rights to therapies that are compatible with its current drug portfolio. 

Negotiating Deal Structures To Minimize Risk

The fact that companies are targeting cell and gene therapies earlier in the development cycle is also driving them to consider innovative deal structures to reduce risk. Both larger and smaller companies now often prefer licensing and collaborative agreements, whereas the majority of deals executed for mAbs were straightforward mergers or acquisitions. This shift may be based in part on the lack of long-term safety and efficacy data associated with many cell and gene therapies, but it also may be a reflection of the unique challenges in development of these drugs. Innovative partnerships can be a lower-risk option for licensors or investors who want to expand their cell and gene therapy portfolios without assuming full financial responsibility. Partnerships and licensing deals can also help reduce the risk of possible disruptions in business operations and productivity, which often occur following M&A deals as both parties may need to restructure their resources and teams.

Looking Ahead

As the discovery of promising new cell and gene therapies continues to expand, the emphasis on collaboration and innovative structuring in licensing, partnering, and M&A arrangements is expected to grow rapidly. Companies will exercise the option to follow up on previous collaborative deals, punctuating the sector with potentially massive exclusive licensing agreements and acquisitions. 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 development is still in its nascent stages and it will be critical for stakeholders, including payers, healthcare providers, manufacturers, and pharmaceutical companies, to collaborate and share best learnings and practices to complete complex and challenging development programs and plan for successful commercialization strategies. 

References:

1. Kong X., Wan J., Hu H., Su S., Hu, Y., Evolving patterns in a collaboration network of global R&D on monoclonal antibodies, mAB’s, 2017, 9,7, 1041-1051.

About The Authors:

Lev Gerlovin is a vice president in the Life Sciences Practice at CRA. He has more than 12 years of experience in life sciences strategy consulting, focused on commercial and market access strategies.  Pascale Diesel previously served as a vice president in the Life Sciences Practice at CRA from July 2017 through December 2019. Dr. Diesel has worked in global development, marketing, planning, and business development and has more than a decade of strategic consulting experience focusing on portfolio optimization and valuation.

The views expressed herein are the authors’ and not those of Charles River Associates (CRA) or any of the organizations with which the authors are affiliated