Finding the next Prevail

An $880m buyout by Lilly shows that some gene therapy companies have not yet priced themselves out of the market.

Deals

Lilly buying Prevail this week sends the obvious message that gene therapy assets remain in demand. It should also not go unnoticed that the pharma group pulled the acquisition trigger before several binary outcomes threatened to crystallise additional value in Prevail’s stock next year.

While numerous gene therapy groups remain in play, this will be a cautionary tale for those buyers who have spent recent months looking on as the values of potential targets climbed, pricing them out of the market. Crispr Therapeutics, and perhaps Uniqure before it, are two cases in point.

Of course, should Prevail’s binary events go the wrong way, Lilly will have egg on its face. But, with an up-front acquisition price of $880m (plus a $160m contingent value right – a financial instrument that somehow refuses to go out of fashion), this is a risk the company clearly feels comfortable with.

Float, then sell

It is also interesting that Prevail had been publicly traded only since mid-2019. Thus floating a company, even for just a few months, remains the smart option for venture investors keen on an exit but wanting public validation to maximise the takeout price.

Look no further than two of Prevail’s peer companies, Passage Bio and Taysha Gene Therapies, for examples of the public market’s exuberance: both were floated this year with only preclinical assets to their name, and they are now worth $1.2bn and $800m respectively.

Interestingly, EvaluatePharma’s analysis of sellside consensus estimates for the biggest forecast gene therapies still in the hands of small biotechs yields two preclinical assets in the top five: Logicbio’s LB-001 and Bridgebio’s BBP-631.

The sellside's biggest unpartnered gene therapies 
Project Gene therapy type 2026e sales ($m) Status Company Mkt cap ($bn)
HMI-102 PAH gene for phenylketonuria 884 Phase II Homology Medicines 0.5
RP-A501 LAMP2B gene for Danon disease 824 Phase I Rocket Pharmaceuticals 3.2
LB-001 MCM gene for methylmalonic acidaemia 606 Preclinical Logicbio Therapeutics 0.3
BBP-631 21-hydroxylase gene for congenital adrenal hyperplasia 426 Preclinical Bridgebio Pharma 7.5
AAV-GAD GAD gene for Parkinson's disease 396 Phase II Meiragtx 0.6
KB103 COL7A1 gene for epidermolysis bullosa 381 Phase III Krystal Biotech 1.2
AVR-RD-01 GLA gene for Fabry disease 323 Phase II Avrobio 0.6
EDIT-101 CEP290 gene for Leber's congenital amaurosis 319 Phase II Editas Medicine 4.0
RGX-314 Gene encoding anti-VEGF for wet AMD 287 Phase II Regenxbio 1.6
OTL-200 ARSA gene for metachromatic leukodystrophy 261 Filed Orchard Therapeutics 0.4
Source: EvaluatePharma sellside consensus forecasts.

With Bayer paying $2bn for the private group Asklepios two months ago, some might wonder what the target’s asking price might have reached had it been publicly traded – or indeed whether it would have been taken out at all (Bayer looks for answers with $2bn Askbio acquisition, October 26, 2020).

In the case of Prevail, a company spun out of Regenxbio in 2017 to focus on neuroscience, two 2021 catalysts loom large: results with PR001 in Gaucher’s disease and GBA1-mutated Parkinson’s disease, and the first human data for a recently initiated study of PR006 in frontotemporal dementia with GRN mutations.

Both assets are AAV-based therapies aiming to transfer the genes in question, GBA1 and GRN respectively. Stifel analysts speculated that Lilly might in due diligence have been shown more data than Prevail analysts and investors had seen.

If the results are good enough for bigger studies to be initiated then Lilly will have bought its way into neuroscience gene therapy at a price that does not break the bank. With gene therapy buyouts remaining a trend, the markets will turn to trying to identify the next Prevail.

Selected gene therapy companies
Company Market cap ($bn) Clinical gene therapy projects Status of most advanced
Biomarin 15.4 2 Filed
Sarepta 13.3 6 Phase III
Crispr Therapeutics 10.7 4 Phase II
Ultragenyx 9.7 3 Phase II
Bridgebio Pharma 7.5 1 Phase I
Amicus 6.2 2 Phase II
PTC Therapeutics 4.5 1 Phase III
Editas Medicine 4.0 1 Phase II
Rocket Pharmaceuticals 3.2 7 Phase II
Bluebird Bio 2.9 10 Marketed
Source: EvaluatePharma.

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