Breakthrough in delivery for cell and gene therapy products has led to a wave of M&A activity as big pharma aims not to miss out on the future of medicine
AIM healthcare index at the centre of innovation, has risen 6% YTD compared with the AIM all share, which has declined 7%
finnLife 50 index has also risen 6% in 2020 led by gains in Synairgen (+2,930%), Avacta (+654%), Omega Diagnostics (+322%) and Tiziana Life Sciences (+283%)
London 25 August 2020 Healthcare companies employing and developing cell and gene therapy (C>) are driving the next wave of innovation in the pharmaceutical industry, leading to increased M&A activity as big pharma aims not to miss out on the future of medicine. The AIM healthcare index has been at the centre of this innovation, rising 6% YTD compared with the AIM all share, which has declined 7%.
These are the findings of finnCaps new quarterly Life Sciences sector report, Rude Health.
Rather than just treating a disease and its symptoms, C> can target the underlying cause of a disease, with long-term benefits and curative potential. C> is now being realised on an applicable level, with many products already approved and the FDA expects to approve 10-20 products a year by 2025.
The financials of the sector are reflective of this rapid progress. In 2018, the market value of C> was $536 million – $1.07 billion; but by 2026 it is set to have a valuation of up to$35.4 billion. Given the high proportion of start-ups in the sector, M&A activity is on the rise, as evidenced by the $3 billion Astellas spent in January 2020 to acquire Audentes Therapeutics, specialists in genetics medicines.
In 2014/2015, M&A activity in the sector was $5 billion; by 2018/2019 it had surged 880% to $49 billion. Much of this is driven by big pharma firms not wanting to fall behind their smaller, more versatile competition, as they did with monoclonal antibody technology. Consequently, they have engaged with M&A to speed up and enhance their own R&D efforts.
The report notes that innovators in C> will be well placed to take part in the land grab that will follow as a result of continued advancements in the sector, and highlights now as a good time for investors and pharmaceutical companies to become involved as the sector is rapidly maturing past its high potential research and development stage with an established pipeline of therapies already being developed.
Some of the key reasons why the report considers the C> sector to be an attractive one for investment are:
Pharmas next wave of innovation. C>s can be potentially curative 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 seems determined not to make the same mistake with C>, as reflected in the high deal activity and high deal values seen within this space.
Sector maturation. Advances in the sector mean that the C> 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.
Despite its vital role in the future of medicine, C> also comes with challenges. The report highlights that the manufacture of C>s is difficult given they are, by definition, personalised for the patient. This means they cannot be batch produced for distribution to multiple patients as more traditional medicines can. For example, Zolgensma, which treats those with motor neurone disease, is priced at $2.1 (1.6) million per therapy, making it the most expensive drug treatment ever.
The report also notes how the payment process for C> requires a reworking of reimbursement systems not used to outlaying so much money up front for a treatment with long-term benefits/curative potential versus continuous, and lower payments for ongoing medicine treatment.
The technologies the report shines a spotlight include CAR-T therapy, stem cell therapy, CRISPR, RNA therapies, among various others.
Arshad Ahad, Research Analyst, Life Sciences, at finnCap, commented:Few technologies in the life sciences sector hold as much promise as Cell and Gene Therapy, with its ability to provide long-term benefits and curative potential. These technologies have been seen as the future of medicine for many years, and now we are closer than ever to that future becoming a reality. If Cell and Gene therapy does become the backbone of treatment regimes in the future, similar to the rise of monoclonal antibodies, then the companies involved are developing expertise in a critical part of the life sciences industry, which should confer a significant competitive advantage as the sector matures further. Now is therefore a good time to invest in the future.