As the cell and gene therapy market matures, companies are looking to gain a stronger foothold by acquiring innovators rather than collaborating with them.
From Collaborations to M&A
Although only a handful of cell and gene therapies have received regulatory approvals, study results are highly promising. Large pharma and biotech companies alike have identified cell and gene therapy as a market worthy of significant investment. Until recently, the market has been dominated by collaborations between big pharma and smaller firms that focus on the development of novel cell and gene therapies. These partnerships seek to leverage proprietary technologies to target specific disease states.
However, the nature of transactions has changed drastically as the cell and gene therapy markets mature. Although investment in the market has increased exponentially, there is a shift from collaboration to acquisition. Large drug companies are increasingly interested in establishing a firmer foothold rather than collaborating with smaller firms to reduce risk. These companies are not managing their exposure to cell and gene therapies as rigorously now that the market has become more established. While co-development deals will continue to form, big pharma is electing to acquire at increasing frequency. Of course, these types of acquisitions — regardless of size — must provide quantifiable value for shareholders. The value will continue to be realized as acquired therapies advance clinically; however, market growth projections have helped buyers justify valuations and appease shareholders. Value within this space has been heavily driven by market growth projections to this point.
Another consideration that continues to accelerate acquisitions within this space is the competitive nature of today’s pharma companies. The transactions are not happening within a vacuum, and industry players are very conscious of their competitors’ actions. Companies are motivated to respond to the actions of rival firms. As a result, a number of cascading acquisitions have occurred in the cell and gene therapy space. These acquisitions will continue to apply pressure on major companies absent from the market and will likely translate into increased M&A activity going forward.
Cell and gene therapy continues to be an exciting space for investors. Transactions within the last 18 months alone show a trend toward increased acquisition. Notably, the market has seen deals between Brammer Bio and Thermo Fisher Scientific ($1.7 billion), Spark Therapeutics and Roche ($4.3 billion) and AveXis and Novartis ($8.7 billion) — each motivated by different factors.
The addition of Brammer Bio to Thermo Fisher is expected to be accretive in the first year. Thermo Fisher acquired a leading CDMO and stands to benefit from strong growth projections and increased R&D investment in cell and gene therapy. Operational synergies highlight further long-term benefits to this deal.
As drug development companies, Roche and Spark Therapeutics stand to benefit from increased strength in R&D. Through the acquisition, Roche gained access to Spark’s expertise in the development and manufacturing of therapies for a variety of genetic diseases and secured a product portfolio that includes the first FDA-approved gene therapy and several candidates in development.
Meanwhile, Novartis acquired AveXis to bolster its market position. Novartis owns one of the first FDA-approved cell therapies, Kymriah. The company also addressed development and manufacturing shortfalls with the acquisition of CellforCure, the French CDMO that will begin manufacturing Kymriah for Novartis in mid-2019. The AveXis deal provides Novartis with expertise in gene therapy and a robust pipeline of candidates.
While some companies have yet to take the leap into the cell and gene therapy market, preliminary clinical data indicate that this field has high promise for patients and high investment for major pharma and biotech companies. As long as shareholder value can continue to be identified, this investment will materialize in more acquisitions sooner rather than later.
Sosna & Co.: Our Network. Your Growth.
Sosna & Co. provides business development services to clients in the pharmaceutical and biotech industries. We pride ourselves on our ability to stay ahead of change, leverage technological advances and pass on insights, which are all crucial capabilities in the rapidly evolving cell and gene therapy space.
Our global network and industry relationships allow our clients to make impactful connections to address their unique business needs. We support both early stage emerging biotech and big pharma firms in their search for partnering, licensing and acquisition opportunities. Our goal at Sosna & Co. is to serve as an extension of our clients’ executive team, providing services that leverage our business development expertise to create growth for our partners.