David H. Crean, Managing General Partner for Coast BioVentures, updates and highlights the latest trends in the cell and gene therapy market for deal activities and financings over the past two years since his original article on the topic was published on PharmaBoardroom in June 2019.
Cell and gene therapies (CGTs) continue to be at the very center of healthcare innovation and are the fastest-growing areas of therapeutics. We have already seen CGTs contribute to some of the most significant disruptions in the pharmaceutical industry, especially during the pandemic. CGTs represent innovative approaches to treat severe diseases, such as cancer, as well as rare diseases. Over the next few years, more than 50 new in vivo and ex vivo cell and gene therapy launches are already planned.
Excitement first took flight in the scientific community in the early 1990s, when the first gene therapy trial showed significant success. Since then, CGT-related research and development (R&D) in the United States continues to grow at a fast rate, with a number of products advancing in preclinical and clinical development stages. The FDA’s Center for Biologic Research (CBER) has already approved numerous cellular and gene therapy products – a list of these products may be found here.
Like other industries, the CGT industry entered unchartered territory during the health crisis. This period of the pandemic highlighted the importance of R&D in the biopharmaceutical ecosystem. Many CGT companies were forced to change the ways they operated and to introduce innovative and more efficient processes. Many CGT companies were hit particularly hard because of their complex manufacturing and delivery mechanisms as well as their funding model. In some respects, there was a silver lining to the crisis. The COVID-19 crisis supercharged innovation. Concerted efforts to develop RNA-based COVID-19 vaccines demonstrated proof of concept of RNA platforms within months, accelerating progress with some CGTs.
Pipeline Developments
Many CGTs are in various stages of development with more than 500 companies globally (source: Pitchbook 2021). According to a report from the The Alliance for Regenerative Medicines, we are on track to have the highest annual number of regulatory approvals of new gene therapy and gene-modified cell therapy products, with several already approved and additional ones to receive regulatory decisions across the US and Europe in 2021.
Pipeline data derived from Pharmaprojects demonstrates the significant expansion of R&D projects over the past 5 years. The data is broken down by industry categorizations including cell therapies, gene therapies and RNA therapies.
For cellular therapies including chimeric antigen receptor, stem cell, T cell receptor and tumor-infiltrating lymphocytes, there has been an explosion of new projects on a global basis for assets in preclinical stage and various clinical stages. Nearly 1200 cellular therapies are in the preclinical stage of development in 2021 representing a 31% increase over prior year and a 250% increase since 2016. Approximately 625 cell therapies are in the clinical stage of development with the large majority in either Phase I or II development. Oncology and rare disorders dominate the therapeutic applications of cell therapies in 2021.
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For gene therapies including lytic virus delivery, there has also been a large increase in new projects on a global basis for assets in preclinical stage and various clinical stages. More than 1240 gene therapy approaches are in the preclinical stage of development (2021) representing a 35% increase over prior year and a 308% increase since 2016. Approximately 520 gene therapies are in the clinical stage of development with the large majority (95%) in either Phase I or II development. Similar to the cell therapy class, gene therapies are largely being tested in oncology and rare disorders in 2021.
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RNA therapies such as mRNA technology have enabled development of COVID-19 vaccine candidates with unprecedented speed and outstanding efficacy rates. Going forward, this technology will not only revolutionize the field of vaccine development by allowing a rapid response to disease outbreaks, it will also help to address diseases of unmet medical need with gene therapy approaches. For RNA therapies such as mRNA, oligonucleotide, non-antisense, non-RNAi, RNA interference, and antisense therapy, the Pharmaprojects data highlight this emerging area of R&D with a large majority of assets in the preclinical stage (n=345) with 100 therapies being tested clinically in 2021. Oncology, rare diseases and anti-infectives dominate the applications of RNA-based medicines.
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Deal Making Activities
Based on recent data from DealForma, more cash flow is coming into the CGT space relative to prior years. Total upfront cash and equity in CGT deals and finance are outpacing the last two years and, if you strip out two large deals (Bioverativ/ Sanofi and Juno/ Celgene) in 2018, 2021 outpaces all prior years. Mergers and acquisitions (M&A) has garnered approximately $11B YTD 2021. One of the main motivators for M&A in the life sciences is a hunger for innovation and new intellectual property. There is a lot of capital waiting to be deployed (i.e., dry powder) and strong balance sheets in the industry, so companies are going to continue to use those mechanisms to support their overall strategic initiatives. The key players operating in the market are focused on adopting strategies such as M&A, in order to gain access to innovative products and expand their product offerings in the potential markets. Cancer drugs and gene and cell therapies continue to be major draws. The huge potential of CGTs has generated a significant amount of deal activity, including M&A and alliances / collaborations between biopharma companies, and financings to support the high cost of development, as companies look to get into the field or add on to existing CGT platforms.
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Some deals in the second half of 2021 and into 2022 could center on the need for acquirers to quickly address operational challenges, scale and efficiencies, boosting distribution channels, strengthening their ability to source active pharmaceutical ingredients or provide manufacturing for innovative CGTs. Various drivers have motivated biopharmaceutical companies to make significant investments or in many cases acquire or collaborate to develop the necessary manufacturing capabilities. The potential value of providing such manufacturing capabilities has in turn driven consolidation among contract manufacturing organizations, or CMOs, and contract development manufacturing organizations, or CDMOs, companies who provide such manufacturing as a service to product innovators.
Few technologies in the life sciences sector hold as much promise as CGT. Rather than just treating a disease and its symptoms, this technology can target the underlying cause, with long-term benefits and curative potential. As such, competition for CGT assets has caused significant increases in valuations for many of the companies developing them. There were approximately 100 mergers and acquisitions (M&A) deals over the past two years (2020-2021) in the CGT space, according to Biomedtracker database. Several selected recent acquisition transactions over the past two years that were either announced or closed are highlighted below.
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Beyond the headline M&A deals, life sciences companies from the biggest pharmaceutical companies to early stage biotechs are collaborating through alliances to identify and develop not just CGTs but targets against which they may be effective and numerous technological components that are often needed to make these therapies work. Partnerships in the CGT space will establish new records in 2021 with platform discovery and preclinical deals dominating the pack (DealForma).
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There were more than 330 alliance deals since January 2020 in the CGT space, according to Biomedtracker database. Several recent alliance transactions illustrative of the active deal space over the past two years that were either announced or closed are highlighted below.
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Financing Activities
The investment community has a pipeline of portfolio companies, just as pharmaceutical, biotechnology and CGT companies have R&D pipelines. Venture investors have significant capital to deploy and a lot of companies that they intend to grow over time. That in turn fuels M&A activity in the future. Venture Capital (VC) investments demonstrated strong growth in Series B investments, platform/ discovery and preclinical stage companies in 2021 YTD (DealForma). The vast amount of money flowing into cell and gene therapy development suggests investor confidence in the field’s future remains high, even as clinical, regulatory and commercial setbacks have hindered a number of companies.
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Some of the key reasons why investors consider the CGT sector to be an attractive one for investment and high returns are:
- Pharma’s next ‘wave’ of innovation. CGTs can be potentially curative/one-off treatment options as they usually target the underlying cause of disease. In the long term, these therapies could become the backbone of treatment regimens, and solutions to various unmet needs.
- Deal activity. Big Pharma had to play catch-up with monoclonal antibody technology, and seem determined not to make the same mistake with CGT, as reflected in the high deal activity and high deal values seen within this space.
- Sector maturation. Advances in the sector mean that the CGT sector is beginning to mature beyond the R&D stage and into commercialization stage, with some products already approved, and with a very large future pipeline of therapies.
- Revenue and Return. Therapies in this space can command high prices, allowing for high revenue generation, even from rare diseases and limited patient populations.
According to The Alliance for Regenerative Medicine (ARM), rapid financing activity in the cell and gene therapy industry exceeded prior records with more than $14B in just the first half of 2021. Over half of this funding is from venture capital and private investments, with over 100 funding deals of this type. The surge of investment in the sector has made H1 2021 the strongest half on record and put the sector on a path to outperform 2020, which broke financing records with nearly $20B raised despite the challenges of the COVID-19 pandemic.
A non-exhaustive, representative sample of recent private and public financings over the past three months in the CGT space, according to the Biomedtracker database, is highlighted below demonstrating the capital intensiveness and vast sums of money being raised to advance pipelines and company growth mindsets in the sector.
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Initial public offerings are considered the ‘lifeblood’ of the biotech industry for both companies and investors. Stock listings give young companies access to the vast amount of cash necessary to advance their drugs through clinical development, and their venture backers a crucial opportunity to earn a cash-on-cash return and form new portfolio companies. Many young companies have gone public at valuations never thought possible in the 2000s. Records have been made and in 2020, a new high-water mark was set during the deadliest pandemic in a century.
Several recent U.S. biotech IPOs of $50 million or higher are noted below in the Biopharma Dive tracking report for the past six months. Initial public offerings have fueled the sectors boom and highlight how the capital markets have responded, both negatively and positively, to the respective stocks since going public. A key question on this writer’s mind is whether these market caps are sustainable long term and when will valuations calibrate to more sensible levels. In this industry, only the presence of key data (clinical or other milestone events) is what will truly drive sensible stock inflections.
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Final Thoughts
Continuing advances in CGTs are transforming how we treat and potentially cure certain diseases and dramatically changing healthcare outcomes. What does the next decade look like for this life-changing field of science in bringing transformative solutions, health, and continued hope to patients? Only time will provide answers. Nonetheless, significant investment and energies are being put forth to drive the sector.
The key attraction to investing and deal activities in the sector is that the companies are anticipated to be well placed for the next ‘wave’ of innovation. If CGT does become the backbone of treatment regimes in the future, then these companies are developing technology and expertise in a critical sector of the life sciences industry, which should confer a competitive advantage as the sector matures further.
Many of the companies will become attractive M&A targets and collaborative partners. In addition, if these CGT companies are able to demonstrate efficacy and safety, they will be able to command a high price for their therapies and generate large revenues – even from rare diseases and limited patient populations. Now is a great time to invest in the ‘future’.
