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Opinion: How investors should play gene-therapy stocks – MarketWatch

Posted: September 7, 2017 at 2:46 pm

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 hasnt already lost their sight can expect to be legally blind before they reach 21 years of age.

Characterized 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 Inc. ONCE, +4.60% was granted a priority review of a treatment for LCA that may make it the first gene therapy approved for use in the U.S. by the Food and Drug Administration (FDA).

Read: Novartis CAR-T therapy was the first to be approved in the U.S.

The Philadelphia-based company will by Jan. 12 discover 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 therapys 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 hemophilia, a disease that afflicts about 20,000 people in the U.S. and around 400,000 globally for which the market is worth about $8.5 billion in the U.S. and European Union.

In-human trials of SPK-8011 recently showed that Sparks therapy has the potential to lift the Factor VIII protein necessary for normal blood clotting to functional and sustained levels. In short, as with the Luxturna, the therapy has the potential to offer a one-shot cure.

That would be seismic for hemophiliacs, 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 hemophiliacs blood is again unable to clot normally. Spark is also developing a treatment for hemophilia B, a much smaller market.

A new dawn

Biotech companies have reached this point because research has advanced to the stage where weve 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 Inc. VYGR, +3.45% is focused on gene therapies for neurological disorders such as Parkinsons, Huntingtons, Lou Gehrigs disease or ALS, Friedreichs ataxia (which damages the nervous system), Alzheimers and chronic pain.

In addition to cancer immunotherapy and the more controversial gene editing, bluebird bio Inc. BLUE, +1.32% has eight gene therapy programs, including research into adrenoleukodystrophy, or ALD, a deadly brain disorder that mostly affects boys and men; beta thalassemia; and sickle cell, none of which have a cure.

Should Spark, or another company such as BioMarin Pharmaceutical Inc. BMRN, +0.67% or Sangamo Therapeutics Inc. SGMO, +5.98% 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 PLC SHP, +1.39% which had revenue from hemophilia treatments of $870.9 million in the first quarter of 2017.

Cost problems

Cost has been a headwind for the two gene therapies so far approved. In April, Fierce Pharma reported that uniQure NV QURE, +2.61% would not ask the European Medicines Agency to renew its marketing authorization for Glybera, the worlds most expensive drug at $1 million, 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.

Europes other approved gene therapy has fared no better. GlaxoSmithKline Plc GSK, +0.57% 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 treatments effectiveness.

But how do you measure cost? In December, Biogen Inc. BIIB, +1.88% gained FDA approval for Spinraza, a treatment for spinal muscular atrophy, the leading genetic cause of infant death in the U.S. 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 Inc. AVXS, +0.39% 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 is 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.

Investors seeking to benefit from a potential medical moonshot should consider allocating capital on a long-term basis to well-managed gene therapy companies with transformative assets that give them a competitive advantage.

Ethan Lovell is co-portfolio manager of the Janus Henderson Investors Global Life Sciences strategy.

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Opinion: How investors should play gene-therapy stocks – MarketWatch

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