Does Novartis really love lentiviral?

Novartis has shown that it is not afraid to double down on gene therapy even when others are leaving the sector. Now the big pharma is rumoured to be interested in acquiring Avrobio, which would give it lentiviral vector expertise to add to its existing adeno-associated viral vector-based gene therapy franchise.

Avrobio could represent something of a bargain – the group’s stock has done badly even in the context of an underperforming gene therapy sector. But there are reasons to be cautious about Avrobio’s prospects, and thus its attractiveness as a target.

There have been concerns about lentiviral vector-based gene therapies because of the theoretical risk of insertional mutagenesis; namely that the gene therapy could trigger cancer. This makes the case for reserving such therapies for life-threatening diseases or those with no alternatives even stronger than for gene therapy more broadly. Other lentiviral players like Orchard Therapeutics and Rocket Pharmaceuticals are focused on severe conditions where there is no standard of care, or where existing options involve transplants. Like gene therapy, transplants require conditioning regimens, Stifel analysts noted.

Meanwhile, Avrobio’s pipeline largely targets disorders that do have existing therapies, such as Gaucher disease, for which enzyme replacement therapy is available. This raises questions about the commercial prospects of its projects even if approved.

In addition, Avrobio’s story so far has been marked by disappointments, such as the discontinuation of its Fabry disease candidate, AVR-RD-01.

Price tag?

Novartis might merely be interested in Avrobio’s lentiviral platform to expand its gene therapy capabilities. The Swiss pharma giant already sells the AAV-based therapy Zolgensma, and gained another AAV option with the 2021 acquisition of Gyroscope.

If so, what would be a realistic cost? StreetInsider, which initially reported Novartis’s interest citing anonymous sources, mentioned a potential price tag of “more than quadruple” Avrobio’s share price, which was $0.87 before the rumours surfaced. The stock nearly doubled yesterday but had fallen back this morning, giving the group a $62m market cap.

Stifel reckons a $200m buyout could be possible, but conceded that a beaten-down Avrobio would not have much bargaining power. Novartis has much larger sums at its disposal, of course, although during the group’s recent fourth-quarter earnings call it said its focus would be on “sub-$5bn assets”.

If a deal does emerge, could it be good news for the likes of Orchard and Rocket, by adding credence to the claim that lenti really is coming back? Neither has seen a share price boost on the rumours, and it would probably take a firm offer to pique investors' interest. The former has also had a rough ride of late on the stock market, but the latter has been a rare gene therapy success story, at least based on share price performance.