Finding the next Prevail

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.

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.