Ethan Lovell, co-portfolio manager of the Janus Henderson Global Life Sciences Strategy explains why medical moonshots* are successful only after many years of research. He believes that a long-term approach to investment is therefore warranted. This article was first published on MarketWatch on 5 September 2017. Used with permission.
For a few thousand people around the world, reaching the age of 20 is a landmark to dread, not to celebrate.
Coping since birth with Leber Congenital Amaurosis (LCA), anyone with this genetic eye disorder who has not already lost their sight can expect to be legally blind before they reach 21 years of age. Characterised by deep-set eyes that are prone to involuntarily, jerky movements, LCA is caused by a fault in one or more of about 14 genes so far identified. There is no proven treatment, although that may soon change.
In late August, biotech company Spark Therapeutics was granted a priority review of a treatment for LCA that may make it the first gene therapy approved for use in the US by the Food and Drug Administration (FDA). The Philadelphia-based company will discover by 12 January whether the FDA will issue a biologics license for Luxturna, which can replace the faulty RPE65 gene that causes LCA with a properly functioning copy. Should it be approved, victims of this disease will soon be able to receive a single injection that may permanently restore functional eyesight.
Gene therapy’s payoffs
While traditional research is usually focused on unlocking a way to treat one condition, gene therapies such as Luxturna may be game changers because they are based on platforms that can be adapted and used to tackle multiple inherited disorders. Using similar techniques, Spark is also working on a functional cure for haemophilia**, a disease that afflicts about 20,000 people in the US and around 400,000 globally, for which the market is worth about $8.5bn in the US and European Union.
In-human trials of SPK-8011 recently showed that Spark’s therapy has the potential to lift the Factor VIII protein necessary for normal blood clotting to functional and sustained levels. In short, as with Luxturna, the therapy has the potential to offer a one-shot cure. That would be a seismic result for haemophiliacs, whose main option today is regular infusions of Factor VIII protein. Unfortunately, within a few days almost none of the protein remains in the body and the haemophiliac’s blood is again unable to clot normally. Spark is also developing a treatment for haemophilia B, a much smaller market.
A new dawn
Biotech companies have reached this point because research has advanced to the stage where scientists have figured out how to identify the genetic causes of disease and how to apply that knowledge to develop therapies that will replace defective genes to provide a lasting cure.
Voyager Therapeutics is focused on gene therapies for neurological disorders such as Parkinson’s, Huntington’s, Lou Gehrig’s disease or ALS***, Friedreich’s ataxia (which damages the nervous system), Alzheimer’s and chronic pain.
In addition to cancer immunotherapy and the more controversial gene editing, Bluebird Bio has eight gene therapy programmes, including research into adrenoleukodystrophy, or ALD, a deadly brain disorder that mostly affects boys and men; beta thalassemia (a group of blood disorders); and sickle cell anaemia, none of which have a cure.
Should Spark, or another company such as BioMarin Pharmaceutical, or Sangamo Therapeutics which are also working on hemophilia, succeed with its gene therapy, it could adversely impact suppliers of traditional Factor VIII protein infusions, such as Shire, which had revenues from haemophilia treatments of US$870.9m in the first quarter of 2017.
Cost has been a headwind for the two gene therapies so far approved. In April, Fierce Pharma reported that UniQure would not ask the European Medicines Agency to renew its marketing authorization for Glybera, the world’s most expensive drug at $1m, when it expires in October, because in the four years after it gained approval in 2012 it was used commercially and paid for once, according to the MIT Technology Review. Europe’s other approved gene therapy has fared no better. GlaxoSmithKline said in July it is seeking a buyer for Strimvelis, a treatment for a rare inherited immune deficiency, which took a year after approval to gain its first patient.
Perhaps the solution is a new payments system for ultra-expensive and long-lasting gene therapies, based on annuities for each additional time period of a treatment’s effectiveness. But how do you measure cost? In December, Biogen gained FDA approval for Spinraza, a treatment for spinal muscular atrophy (SMA), the leading genetic cause of infant death in the US. Spinraza is priced at $375,000 a year for life (after $750,000 in the first year of therapy), while a one-shot gene therapy being developed by AveXis for SMA may provide a cure to someone who could go on to live 80 or more years. What sort of a premium for AveXis’ approach might be justified?
Pricing is not dissuading biotech companies. There are about 7,000 genetic diseases, and the whole pharmaceutical and biotech industry is now working to solve each of those problems. We think that investors seeking to benefit from a potential medical moonshot should therefore consider allocating capital on a long-term basis to well-managed gene therapy companies with transformative assets that give them a competitive advantage.
*medical moonshot = a novel approach to a treating a significant health problem or addressing a previously unmet medical need, using breakthrough science/technologies.
**Haemophilia = a medical condition which impairs the body’s ability to clot blood.
*** Amyotrophic lateral sclerosis (ALS): also known as motor neurone disease (MND) and Lou Gehrig's disease.
These are the manager’s views at the time of publication. The information in this article does not qualify as an investment recommendation. References made to a sector and its stocks do not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase them. Examples are intended for illustrative purposes only and are not indicative of the historical or future performance of a sector or its stocks, or the chances of success of any particular strategy.
The health care industries globally are subject to differing government regulation and reimbursement rates, as well as governmental approvals of products and services, which could have a significant effect on price and availability, and can be significantly affected by rapid obsolescence and patent expirations.
Foreign securities are subject to risks including currency fluctuations, political and economic uncertainty, increased volatility, lower liquidity and differing financial and information reporting standards, and may be magnified in emerging markets.