The Life Sciences sector has recently had the spotlight shining upon it, as a result of the global COVID-19 pandemic, and we have seen extensive investment and redeployment and refocusing of resources seeking appropriate diagnostics, treatments and vaccines. But while all this is happening, a quiet revolution continued to brim over in the pharma world which may produce long term benefits – that of Cell and Gene Therapy (CGT).
CGT has been seen as the ‘future’ of medicine for many years and now we are closer than ever to that future becoming a reality. As such, innovative CGT-based tech and businesses have become the new talk of the pharma town, according to finnCap’s Life Sciences analysts, writing in the latest Life Sciences Quarterly Sector Note, summarised here.
Few technologies in the life sciences sector hold as much promise as CGT. Rather than just treating a disease and its symptoms, this technology can target the underlying cause, with long-term benefits and curative potential.
Multiple products are already approved (market estimate of c.$1bn in 2018), representing only the tip of the iceberg in relation to the massive pipeline of upcoming therapies (FDA expects to approve 10-20 products per year by 2025), bolstered by the influx of funding and M&A ($49bn in 2018-19) activity within this space.
In January 2019, the FDA announced that by 2020 onwards, it anticipates it will receive more than 200 CGT investigational new drug (IND) applications per year, in addition to the 800 active cell-based or directly administered gene therapy INDs that it already had on file at the time. By 2025, the FDA predicts that it will be approving 10 to 20 CGT products a year, comparing the current activity to the accelerated development of monoclonal antibody drugs in the late 1990s – which have now become the backbone of modern treatment regimens. finnCap estimates that monoclonal antibodies will generate c.$156bn of revenues in 2020, implying a ten-year CAGR of 15%.
Unsurprisingly, Big Pharma does not want to miss out on this next wave of innovation, and M&A activity in the space has increased exponentially. There’s a tendency of Big Pharma to acquire proven technology to supplement or enhance its own R&D efforts and this heightened activity of late is certainly borne out in the figures.
In 2014-15, M&A deal values in this sector were $5bn, and in 2018-19, this surged 880% to a combined two-year total of £49bn. The cell therapy, gene therapy and tissue engineering sector raised $2.9bn in venture capital in 2018 – twice the 2017 amount.
What is Cell Therapy?
Cells are the functional units that work together to form organs and tissues. Cell therapy is the use of cells that are either from the patient themselves (autologous) or from a donor (allogeneic) to treat disease. Cells used for cell therapy may or may not be genetically altered. It is sometimes easier to remove cells from the body, treat them with gene therapy, and then place those cells back into the patient, rather than treating cells inside the body. Thus, cell and gene therapy are often linked together.
What is Gene Therapy?
Gene therapy is the use of genetic material to treat genetic diseases. This could involve adding a wild type ‘healthy’ copy of the gene (gene addition) or altering a gene with a mutation (gene editing). To introduce the gene into the genome inside cells, vectors, both viral vectors, such as adeno-associated virus (AAV) vectors, and non-viral vectors, such as electroporation (electrical pulse), are used. The advent of safe and effective vectors for the delivery of gene therapy products is the innovation that has led to the surge of activity in the gene therapy sector.
Some of the key reasons why we consider the CGT sector to be an attractive one for investment are:
- Pharma’s next ‘wave’ of innovation. CGTs can be potentially curative/one-off treatment options as they usually target the underlying cause of disease. In the long term, these therapies could become the backbone of treatment regimens, and solutions to various unmet needs.
- Deals. Big Pharma had to play catch-up with monoclonal antibody technology, and seem determined not to make the same mistake with CGT, as reflected in the high deal activity and high deal values seen within this space.
- Sector maturation. Advances in the sector mean that the CGT sector is beginning to mature beyond the R&D stage and into commercialisation, with some products already approved, and with a very large future pipeline of therapies.
- Revenue. Therapies in this space can command high prices, allowing for high revenue generation, even from rare diseases and limited patient populations.
Challenges of CGT
The novelty of CGT however also presents new, unique challenges:
- Manufacturing challenges. CGTs are usually personalised therapies as opposed to drugs that can be batch-produced for distribution to multiple patients. Consequently, it is difficult to manufacture these therapies in a reliable and cost-effective manner.
- Reimbursement. Healthcare providers are not used to paying large up-front fees for treatments with long-term benefits/curative potential.
- Risks. CGT therapies can present with different, and greater, risks than conventional therapies. For example, gene therapies could possibly cause tumours if new genes are inserted at the wrong location in the DNA.
These challenges are being tackled by the innovative companies within this space. The latest Life Sciences Quarterly Sector Note highlights some of the diverse approaches being taken to provide CGT therapy, and support in the development of such therapies. The key attraction to investing in these companies is that they will be well placed for pharma’s next ‘wave’ of innovation, and the ‘land grab’ that follows. If CGT does become the backbone of treatment regimes in the future, similar to the rise of monoclonal antibodies, then these companies are developing technology and expertise in a critical sector of the life sciences industry, which should confer a competitive advantage as the sector matures further.
Many of the companies discussed in the full report will also be attractive M&A targets and collaborative partners. In addition, if these CGT companies are able to demonstrate efficacy and safety, they will be able to command a high price for their therapies and generate large revenues – even from rare diseases and limited patient populations.
Thus, now is a good time to invest in the ‘future’.