Gene Therapy Is a Huge Opportunity. It Pays to be Patient. - MarketWatch


Illustration by Ari liloan

America’s first injected gene therapy, Roche Holding’s Luxturna, treated an eye disease inherited by a couple of thousand people. The next gene therapy to be approved, Novartis’ Zolgensma, helped 20,000 people born with a serious muscle disorder.

Now, genetic medicine developers are looking beyond rare diseases and aiming at more common afflictions. Diabetes. Heart disease. Wrinkles.

By changing the genetic instructions within cells, a one-time infusion could repair a heart attack’s damage, free someone from insulin shots, or lower cholesterol for a lifetime. With millions of potential patients, the consequences for the drug industry and healthcare system are far-reaching. True, these therapies may take a decade or more to reach the market, and their prices will have to come down far below Zolgensma’s $2.1 million per patient. Clinical trials could begin as early as next year.

Biotechs targeting not-so-rare diseases with genetic treatments include Regenxbio (ticker: RGNX), partnered with AbbVie (ABBV), and newer companies like Verve Therapeutics (VERV), Tenaya Therapeutics (TNYA), Krystal Biotech (KRYS), and a number of other start-ups. With exchange-traded funds such as ARK Genomic Revolution (ARKG) down 31% versus the S&P 500 index’s 17% gain since February, gene therapy plays have fallen to levels where investors might be willing to look ahead a decade or so when these one-time fixes may be common.

“These are real companies with real technologies,” says Eli Casdin, whose Casdin Capital has large stakes in cardiovascular treatment developers Verve and Tenaya. “The industry always starts where the clinical need is most acute but perhaps narrow, and then broadens its reach to things that are more prevalent, if less acute.”

Regenxbio has been at the center of gene-transfer therapy since 2009, when it licensed University of Pennsylvania techniques that turn hollowed-out viruses, called AAVs, into shuttles to carry genetic instructions into cells. Re-engineered AAVs became the platform for most of the industry, with Regenx supplying gene therapy developers like Novartis (NVS) and Ultragenyx Pharmaceutical (RARE).

Improving Vision

Some five years ago, Regenx began testing its own treatments. Furthest along is a gene therapy for a severe form of macular degeneration, an age-related disease of the retina that afflicts over two million people in developed countries, with about 200,000 new diagnoses each year in the U.S. It’s treated today with repeated injections of antibody drugs like Lucentis from Roche (RHHBY) and Novartis, and Eylea from Regeneron Pharmaceuticals (REGN). Regenx’s one-time treatment inserts a gene to produce the antibody in the eye. Early-phase clinical trials showed improved vision and reduced need for further antibody drugs. Researchers will share interim data in mid-November. A pivotal Phase 3 trial is under way and should conclude in a year or so.

A larger potential market awaits another gene therapy that Regenx is testing for diabetic retinopathy, the leading cause of blindness in working-age people that afflicts some eight million Americans. Early-trial patients showed vision improvements, and a Phase 2 study is under way.

Studies must validate Regenxbio’s retinal treatments. Rival Adverum Biotechnologies (ADVM) stopped testing a gene therapy this summer for a diabetic eye disease, after encountering safety problems. But in September, AbbVie said it would partner with Regenx on retinal gene therapies, with an upfront payment of $370 million and potential milestone payments of $1.4 billion. At $38 a share, and a $1.6 billion market cap, Regenx stock is worth half the value it had in 2018 amid the enthusiasm over Novartis’ $8.7 billion purchase of AveXis. The $900 million on Regenx’s balance sheet, and milestone payments, should sustain the yet-unprofitable biotech firm into the latter part of the decade, when bullish analysts like Raymond James’ Dane Leone project that sales could put Regenx in the black.

Treating Diabetes

Diabetes is growing worldwide. About 1.6 million Americans live with Type 1 diabetes, in which the immune system destroys the pancreas’ insulin-producing beta cells. Glucose monitoring and daily insulin shots can reduce the damage, but a number of start-ups are working on genetic therapies they hope will provide one-time repairs—perhaps also for the even more prevalent Type 2 diabetes.

University of Wisconsin transplant surgeon Hans Sollinger recruited veterans from AveXis to help his company, Endsulin, develop a gene therapy that one of its patents claims can start well-regulated insulin production in liver cells.

A second firm, Jaguar Gene Therapy, has backing from AveXis founders, Eli Lilly (LLY), and healthcare investors at Deerfield Management, to pursue treatments for diabetes and other metabolic diseases, with a gene-transfer technology that has been able to change alpha cells in a lab animal’s pancreas into insulin-producing beta cells. Jaguar’s research head Suku Nagendran says the firm is selecting AAV containers for its therapies and planning for manufacturing.

Gene therapies for a common disease like diabetes will require manufacturing scale that the genetics industry has not yet seen, says Kriya Therapeutics’ CEO Shankar Ramaswamy. At the company’s facility in Research Triangle Park, N.C., Kriya hopes that its high-efficiency processes will reduce costs by an order of magnitude as it commercializes a diabetes gene therapy pioneered at the Autonomous University of Barcelona, Spain, where the approach freed diabetic dogs from the need for insulin shots for up to eight years. Applications to begin human trials could be filed next year, he says.

“Gene therapy is where monoclonal antibodies were, decades ago,” says Ramaswamy. “We need solutions that bring down costs enough to help immense numbers of people.”

Each of these diabetes gene therapy programs is trying a different approach, notes Gbola Amusa, the chief scientific officer at investment bank Chardan Capital Markets. He figures that improves the odds of one succeeding.

Fixing Hearts

As widespread as diabetes is, heart disease is larger, diagnosed in 30 million Americans. It’s the world’s No. 1 killer, and heart attacks cause more deaths than all cancers combined.

Tenaya Therapeutics was launched five years ago with this in mind, says CEO Faraz Ali, but it decided to get there gradually by first bringing out therapies for genetic conditions that lead to heart failure. After good results in animals, Tenaya will seek permission to start human trials next year for therapies aimed at conditions that affect more than 200,000 Americans. Cowen analyst Ritu Baral predicts that each of the three therapies could become a multibillion-dollar market in a decade.

By 2023, Tenaya could be ready for clinical trials of gene therapies that regenerate heart muscle damaged in the 800,000 heart attacks suffered by Americans each year. One Tenaya technique reprograms the heart’s connective tissue cells into becoming muscle cells. Another prompts heart muscle cells to divide, which they normally don’t do after birth. Last year, Tenaya researchers demonstrated heart-cell reprogramming for the first time in a large animal, by repairing heart-attack damage in a pig.

Tenaya is planning its heart-therapy production with large volumes in mind. Regulators have halted clinical trials of other gene therapy developers when companies changed their manufacturing processes in midstream. “Modest changes in manufacturing can make dramatic changes in your gene therapy product,” says Ali. “You can’t wait until you’re in Phase 3 and say, ‘Wow, we’ve got great data...we should think about manufacturing.’”

Gene therapy for the masses will require manufacturers to scale reaction vessels, where microorganisms produce biologic drugs, from a thousand liters to 10,000 liters or more. Without reducing the cost of goods, says Ali, the industry won’t be able to supply large markets at commercially—and societally—viable prices.

After a July initial offering at $15 a share, Tenaya has about $300 million in cash, which it believes will sustain it into 2023. The current $25 stock price values the venture at $1 billion.

Verve Therapeutics is eyeing an even bigger market, with a once-and-done therapy to lower the risk of cardiovascular disease. Statin pills can do this, of course, when taken daily for decades. New and expensive injections of drugs like Repatha from Amgen (AMGN) or Praluent from Regeneron also dramatically cut cholesterol by inhibiting an enzyme called PCSK9.

Using a new gene-editing technology called base-editing, licensed from Beam Therapeutics (BEAM), Verve knocks out the gene that drives PCSK9 production. A single infusion has cut cholesterol levels in monkeys by 60% for 15 months and counting. The company hopes to begin human trials next year, starting in families that suffer from overactivity in that gene. Verve also has sights on another gene that causes high levels of cholesterol and triglycerides. After initially targeting several million people who have inherited particularly bad versions of these genes, Verve ultimately wants to treat the masses. “These genes are just bad actors,” says Verve CEO Sekar Kathiresan. “You can get rid of them and just get healthier.”

A June initial offering at $19 a share raised $300 million and leaves Verve with cash it expects to suffice until 2024. Even with Verve stock now at $55, Guggenheim Securities analysts see more than 50% upside.

The clinical trials of genetic therapies against rare, severe diseases have taken longer than some investors expected. Large, long-term studies will probably be required for genetic treatments targeting everyday diseases like atherosclerosis, says Matt Feinstein, a cardiology professor at Northwestern University. “A really rare side effect that only affects one-in-50,000 people might not show up in a clinical trial,” he says. “But if the therapy gets out to millions of people, you might start seeing the side effect.”

That said, Feinstein believes that a safe, one-time treatment that lowers blood lipids for a lifetime is well worth pursuing.

Smoothing Wrinkles

Krystal Biotech is another company that could have a gene therapy for a large market. Krystal expects data by year end in a Phase 3 study of its treatment for a serious skin disorder caused by defects in the gene that produces collagen. Early studies showed that Krystal could remedy the disease with genes delivered in re-engineered versions of the HSV-1 virus. Unlike gene therapy vehicles like the AAV virus, HSV-1 doesn’t trigger an immune reaction, so it can be redosed when new skin cells need a repeat.

That feature led Krystal to announce a new venture in March called Jeune, which will test aesthetic applications of its collagen therapy. Age-related wrinkles, for example, result from a reduction in collagen output. Excitement over this Botox-size market sent Krystal shares above $80 this year, before they settled back to a recent $53.

Krystal declined to discuss its collagen therapies. But fans like H.C. Wainwright’s Joseph Pantginis think the shares could double.

Meanwhile, both companies and payers will have to figure out how to price a once-and-done gene therapy for the masses, once it’s approved. But it has been done before, for transplants and heart bypasses. “Perfecting the science and manufacturing are just entry stakes,” says Tenaya CEO Ali. “We have to create something that is sustainable, that the healthcare system can afford.”