The rapid rise of the emerging genetic therapies sector has drawn strong interest from traditional pharmaceuticals and antitrust regulators alike. Following an unusually lengthy 10-month investigation, the US Federal Trade Commission (FTC) on Monday granted antitrust approval for Swiss drugmaker Roche’s USD 4.3bn takeover of gene therapy specialist Spark Therapeutics. In a statement explaining its approval of the deal, the FTC noted that several other gene therapy firms were developing similar treatments, and that Roche would be incentivized to speed the development of its own solution.
On the face of it, regulator confidence in looming competition might sound like headwinds for sector valuations and M&A interest.
But we believe both new entrants and big-figure acquisitions reflect the current inflection point for gene therapies, as next generation treatments for certain rare diseases are rewarded with safety approval and patient acceptance.
* Four of the most recently approved therapies (one of which, Luxturna, belongs to Spark) are already annualizing sales at over USD 1 billion combined. We expect new approvals, more clarity on the duration of treatment and more favorable reimbursement terms to spur sales growth and support the theme. The initial market opportunity based on approved treatments and the current late stage pipeline, exceeds USD 20bn.
* Our estimate of the initial market potential translates into just 2% of global biopharma sales. We see the chance for marked capital appreciation of the theme should clinical trials and commercial rollouts meet our expectations.
* We anticipate pharma and biotech companies taking genetic therapies increasingly seriously, both as new opportunities and as potential competitive threats. Earlier this month, Japanese drugmaker Astellas Pharma announced a USD 3 billion acquisition of another genetic therapy maker. We estimate that large-cap pharma and biotech companies have now spent USD 41 billion acquiring gene and cell therapy companies since 2017. We believe more acquisitions are likely. Genetic therapies represent a paradigm shift in medicine that has the potential to revolutionize healthcare delivery. In our view, genetic therapy can be considered an SI topic. It aligns to Sustainable Development Goal (SDG) 3 “Good Health and Well-being” due to its aim to cure diseases by addressing their underlying cause rather than reactively treating symptoms. As ever in drug development, not all companies will succeed and idiosyncratic risk is high. We recommend investing in the genetic therapies theme through a diversified portfolio of firms exposed to it to manage the risks associated with clinical failure.
Read more in our new report, “Genetic therapies,” part of our Longer Term Investments series.