While this question may hit too close to home if you’re traveling by plane this summer, it also applies to the overall market.
The first half of the year has been brutal for most investment vehicles. The newspaper headlines are plentiful – “Worst run in 50 years!”, “How it can get worse”, “Recession looming”, or “Stagflation”, etc, etc.
Those of us in the small cap biotech space, or biotech in general, already had our bear-like visitors arrive towards the end of 2021. The pain of supply chain woes and stubbornness of inflation just continues and has eventually impacted all other sectors. Such that, everyone is hand wringing as to how long and how low stocks can get. Additionally, crypto has not been the refuge it had been touted to be.
One benefit of having our particular sub-sector experience a downturn earlier than the rest (a silver lining at best), is that it allowed us to reduce our exposure, taking a more defensive stance, rendering the last few months less gruesome than the rest of the market.
And while economists and investors alike debate where this market is heading, there have been some reassuring signs within the cell and gene therapy sub-sector.
According to the American Society of Gene and Cell Therapy quarterly report1, the second quarter of 2022 has seen the increased volume and value of combined seed and Series A financing for the first time over several quarters. While some smaller startups have had to shutter their operations (mostly from scientific/clinical failures – see Silverback Therapeutics2), Astera holdings have remained in decent cash positions and have been able to advance their pipeline and/or develop lucrative partnerships.
For example Verve Therapeutics (a genetic base editing company in the Astera portfolio) recently entered a $60mm partnership with Vertex3 to advance their pipeline in an undisclosed liver disease. To understand how these partnerships can be more than the monetary value affixed to the deal, Ultragenyx4 (a rare disease company) recently exercised an option to purchase their gene therapy partner GeneTx BioTherapeutics after seeing favorable data on a shared program with a $75mm upfront payment and another potential $115mm to shareholders.
As a sign that even bigger fish are interested in the cell and gene pond, Takeda5,6 made a deal potentially totaling $2B (in the first quarter of 2022) with Code biotherapeutics, a gene delivery company, followed by investment in a 600,000 sqft R&D facility in Cambridge’s biotech hub (also incidentally a hotspot for cell and gene therapy companies). Expanding their gene therapy footprint, Roche recently made a deal with the smaller biotech Avista in eye disease7 to add to their Luxturna blindness gene therapy pipeline that they acquired in 2019. So larger pharma continues to be interested, and at today’s prices have enough “dry powder” to buy the sector outright according to a recent Barron’s article8. So while a great M&A frenzy is less probable, there continues to be “reason to believe” that the value of these unique and paradigm shifting therapies are being recognized, and will prove instrumental in changing the pharmaceutical landscape.
So are we out of the woods yet? Most likely, no. But our current defensive position will allow us to withstand any further shocks (save the end of the world), and serve us well for when the macro environment no longer impedes the outsized potential of our innovative and truly exciting portfolio companies.
1) Gene, Cell, and, RNA Therapy Landscape Q2 2022 Quarterly Data Report. (2022, Q2). https://asgct.org/global/documents/asgct-pharma-intelligence-quarterly-report-draft-q.aspx?_zs=mL0Rc&_zl=HFUB3
2) Plieth, Jacob. (2022, July 25). Silverback puts investors out of their misery. https://www.evaluate.com/vantage/articles/news/snippets/silverback-puts-investors-out-their-misery
3) Taylor, Nick Paul. (2022, July 21). Vertex to tackle liver disease with Verve, putting up $60M to partner on gene editing program. https://www.fiercebiotech.com/biotech/vertex-tackles-liver-disease-verve-putting-60m-partner-vivo-gene-editing-program
4) Pagliarulo, Ned. (2022, July 19). Ultragenyx buys gene therapy partner after new study results. https://www.biopharmadive.com/news/ultragenyx-gene-tx-option-acquisition-angelman-therapy/627546/
5) Patchen, Tyler. (2022, June 22). Takeda to further cement presence in Cambridge, MA biopharma hub with 600,000-square-foot R&D center. https://endpts.com/takeda-to-further-cement-presence-in-cambridge-ma-biopharma-hub-with-600000-square-foot-rd-center/
6) Carroll, John. (2022, Feb 22). Takeda signs off on a $2B deal aimed at bypassing AAV roadblocks on the way to gene therapy 2.0. https://endpts.com/takeda-signs-off-on-a-2b-deal-aimed-at-bypassing-aav-roadblocks-on-the-way-to-gene-therapy-2-0/
7) Gardner, Jonathan. (2022, July 20). Roche digs deeper into gene therapy for the eye. https://www.biopharmadive.com/news/roche-avista-eye-gene-therapy-deal/627688/#:~:text=The%20deal%20suggests%20Roche%20is,an%20inherited%20form%20of%20blindness.
8) Nathan-Kazis, Josh. (2022, May 6). Big Pharma Has Enough Cash to Buy All of Biotech. Why M&A Isn’t Happening. https://www.barrons.com/articles/big-pharma-mergers-biotech-cash-51651844327