Get ready for a world of million-dollar drugs. Pricey gene therapies that could cure devastating genetic disorders in one fell swoop are gaining momentum, brightening the horizon for biotech stocks like Sarepta Therapeutics and BioMarin Pharmaceutical.
The windfall could be huge, with treatments going for as much as $3.5 million a pop. One research firm says the market could be worth $82.2 billion by 2032. And with the snowballing number of gene therapies hitting the market, this slice of the biotech industry could be near an inflection point.
The first gene therapy gained Food and Drug Administration approval in 2017. By the end of 2022, the agency had signed off on a total of five gene therapies for rare diseases. This year alone, the FDA has approved three more. And in December, the agency could add another gene therapy and the first gene-editing drug to the list.
Stephen Majors, a spokesman for the Alliance for Regenerative Medicine, says the FDA is recognizing a high unmet need. Gene therapy could offer major improvements in treatment for patients with rare, genetic diseases — the area these drugs are targeting first.
"The outcomes are often transformative," he told Investor's Business Daily. "In the case of some therapies, they're lifesaving. There were no treatment options previously for those patients. There are also diseases where we know the cost of ongoing care for those diseases is very, very high."
But biotech stocks still have work to do to fully tap the gene therapy market. The companies must wrangle manufacturing and reimbursement challenges. What's more, they'll have to persuade patients to accept a paradigm shift in treatment. Will patients favor a potential cure at a massive cost over chronic — though less expensive — therapies?
Biotech Stocks Move Deeper Into Gene Therapy
Gene therapies differ from what are known as cell therapies, which are much more common. Cell therapy involves transferring human cells into a patient's body. Gene therapies transfer genetic material, which is often carried by a virus modified to be harmless.
Like gene therapies, the first CAR-T cell therapy also gained FDA approval in 2017. Since then, the lion's share of the 32 approvals for cell and gene therapies have been in the former class. But more gene therapy approvals are expected.
Gene therapies have had to leap over obstacles to get to this point, says RBC Capital Markets analyst Luca Issi. He notes that from 2018 to 2020, the FDA rejected several gene therapies and put others on clinical hold. Now the tide seems to have changed, he says.
BioMarin's Roctavian demonstrates the fits and starts in the gene therapy space. BioMarin won FDA approval in June for the hemophilia A treatment. Roctavian helps patients with the genetic disorder produce a needed clotting protein.
But two years ago, it wasn't clear the BioMarin drug would get the nod. BioMarin asked for FDA approval based on six months of data, according to Greg Guyer, BioMarin's chief technical officer. But the agency was reluctant.
"The FDA's perspective was, 'Is that durable? Does (the impact) just last for six months? Or could it last for years?' " he told IBD. "They wanted a couple of years of data just to confirm not only the safety and (effectiveness), but also the durability."
FDA Push For More Approvals
Part of the drive in gene therapy today stems from the FDA itself.
Dr. Peter Marks, who heads up the FDA's Center for Biologics Evaluation and Research, has voiced support in recent years for using the accelerated approval pathway to get gene therapies to market faster. The center also established the new Office of Therapeutic Products to divert more resources to cell and gene therapy reviews and approvals.
During a conference in April, Marks said that if the FDA approves just two or three gene therapies per year over the next few years — "that's a failure," according to FierceBiotech.
Sarepta Chief Executive Douglas Ingram says that five years ago, things weren't moving fast enough to satisfy biotech stock investors. Now the industry is seeing "some practical, actual execution against Dr. Marks' vision."
"I think we are having the green shoots of what could be a significant inflection point in gene and cell therapy," Ingram told IBD.
'Iterative Benefit' Of Gene Therapy Successes
Jorge Conde, a general partner at Andreessen Horowitz, says each gene therapy success builds up to the next, driving the inflection in gene therapy today. Conde leads the venture capital firm's investments in life sciences and health care.
"There is an iterative benefit that every genetic therapy that is successful almost will beget future therapies, targeting similar cells for different diseases," he said in an interview. "So, there's a cumulative benefit that accrues across the class of gene therapies for each success, which has not typically been the case for small-molecule, chemical-based medicine. I think that's one of the biggest drivers here."
But BioMarin Chief Commercial Officer Jeff Ajer says the inflection point in gene therapy has yet to arrive. Today's gene therapies, by and large, treat small patient populations. Most are struggling to gain commercial traction.
"I think once we get to the point where we're approving those kind of numbers — like 40 a year — that are addressing larger, more meaningful population sizes, and once we get to the point they're being used more regularly in clinical practice, I think that's when we'll know we've hit that inflection point," he told IBD. "I think that's coming. It's around the corner."
Pandemic Gives Gene Therapy An Assist
The gene therapy industry is getting a boost from an odd source: the Covid pandemic, says Sam Kay, a solution consultant at analytics firm Clarivate. Clarivate analyzes trends that impact biotech stocks and other industries.
During the pandemic, the agency had to become more flexible at what data it would accept for emergency authorizations. The agency also made it easier to fast-track authorizations and approvals, he said in an interview. And the FDA made the approval process much more transparent.
Now, there's precedence in the gene therapy industry — a road map for biotech stock investors to follow.
"The rest of the companies can follow suit," he said. "This is part of the reason gene medicines were quite slow in the initial uptake. There really wasn't enough precedence. There weren't as many discussions happening with the FDA in the initial place for the FDA to set a process that makes the most sense for gene medicines, especially the gene therapies we're talking about today."
So new approvals could beget more approvals, he says.
Biotech Stocks Lean On Speedy OKs
A piece of that process involves using accelerated approval based on alternative goals in studies. Clarivate's Kay says 43 genetic medicines could gain approval over the next five years. Of those, 21 are looking for accelerated approvals.
In the case of accelerated approvals, companies must later confirm the drug's benefit in an additional study.
Dr. Jeremy Woods is a pediatrician and clinical geneticist at Valley Children's Hospital in Madera, Calif. He was involved in running one of Sarepta's studies leading to approval of its new gene therapy, Elevidys.
"The accelerated approval pathway has really driven a lot of innovation in the field," Woods said. "And I think once you've got a few or handful of therapies with a particular novel technique, that makes it a lot easier to afford. It's not quite so novel anymore, not quite so scary. I would say the technology is just slowly getting better and better."
Sarepta is particularly well-versed in the accelerated approval process. Along with Elevidys, each of its drugs won an accelerated approval.
'An Entire Generation Of Children'
Elevidys treats Duchenne muscular dystrophy, a muscle-wasting disease, in children ages 4 and 5. The disease is caused by a missing dystrophin protein. Dystrophin is involved in keeping muscles intact. Sarepta's gene therapy helps the body make its own shortened form of the protein.
Sarepta still has to prove the shortened protein leads to a functional benefit for patients or will risk losing its approval. The company hopes to have the results of its confirmatory study in hand before year's end. Sarepta has yet to finish the confirmatory studies for its other approved medicines.
Ingram, Sarepta's CEO, applauded the speedy approval for Elevidys. He noted Duchenne patients generally progress rapidly. In a matter of months, the disease could bring irreversible damage or even be deadly for some patients.
"It is often the case that you get accelerated approval because the (studies) are complicated and difficult and will take a long time," he said. "If you had to wait for (the studies to finish), you could lose, in our case, an entire generation of children."
Biotech Stocks: Are These Cures?
That doesn't mean any of these gene therapies will be "one-and-done" treatments. Instead, they could be one treatment with a benefit for five to 10 years.
In a perfect world, you give a gene therapy once, says Sarepta CEO Ingram.
"You dose the patient, safely get the (gene or protein) expression you want," he said. "You've essentially turned the patient into their own therapy-manufacturing facility. They make their therapy for the rest of their lives, if all goes well. And that's a very different model than chronic therapies."
Woods, the geneticist who helped run a Sarepta study, doesn't expect that to be the case for Elevidys. But he does believe it will slow the disease's steady progress.
It's important to note that gene therapies, today, can't be given twice. The patient becomes immune to the virus used to deliver the drug. Sarepta spokeswoman Tracy Sorrentino told IBD that Elevidys is expected to be a one-time treatment. The longest data suggest Elevidys works for at least five years.
Ajer, BioMarin's chief commercial officer, says the bar might be too high to characterize gene therapies as curative. He says Roctavian could have a benefit for "years to many years," replacing multiple weekly infusions for hemophilia A patients.
"We may have made a mistake in terms of characterizing or expecting these therapies to be 'curative' or last a lifetime," he said. "Houses don't do that. Cars don't do that. Other drugs that we've experienced don't do that. So why would gene therapies be held to that expectation?"
Studies from CSL Behring suggest its hemophilia B drug called Hemgenix could have a benefit for at least eight years. Hemgenix, developed in partnership with Uniqure, is the world's most expensive gene therapy at $3.5 million a dose.
Gene Therapies Carry Sticker Shock
Can million-dollar drugs overcome sticker shock?
Andreessen Horowitz's Conde says the market will pay for them. Various stakeholders are willing to pay for high-cost gene therapies for the right patients, he says.
"I think the market will always adapt to the innovation," he said. "Innovation is the lead indicator."
He added: "We will develop these innovative therapies and the two lagging indicators are: How will the market pay for them? And how will we ensure we're thoughtful about how, from a regulatory standpoint, that we test that they are safe and effective? The good news is we're seeing a flexibility in the system on both fronts."
There are success stories. Take Zolgensma, which treats spinal muscular atrophy, an inherited disorder that affects the nerve cells in control of voluntary muscle movement.
Sankalp Sethi, a principal at consulting and technology firm ZS, calls Zolgensma the "poster child" for success in gene therapy. And RBC analyst Issi says the Novartis drug is "the epitome of a good launch."
Last year, Zolgensma brought in $1.37 billion in sales, growing 5% from 2021 in constant currency. This year, biotech stock analysts call for slightly lower sales of $1.26 billion.
Biotech Stocks Mixed On Launches
Some of the other recently approved gene therapies are now on that path, Sethi told IBD. BioMarin's Roctavian gained European approval in August 2022 and U.S. approval this June. It dosed the first commercial patient this past August.
In September 2022, Bluebird Bio gained FDA approval for Skysona, a gene therapy that treats a rare brain disorder. It has now dosed five patients. CSL Behring said it dosed the first hemophilia B patient with Hemgenix in June, seven months after its approval.
But Bluebird also offers two bearish examples. The company has withdrawn its operations in Europe as it struggles to gain traction. Bluebird pulled Skysona and its beta thalassemia gene therapy, Zynteglo, from the European market. Zynteglo is also approved in the U.S., where 11 patients have started treatment.
"The point being that, yes, there's a lot of promise in this space," ZS principal Sethi said. "These therapies can be transformational to the patient's life. This is the future. But the commercial success will take time. That's where I think there's more work ahead for these therapies."
Biotech Stocks Test New Payment Models
Insurance companies, pharmacy benefit managers and the big names behind biotech stocks have come up with innovative ways to pay for these therapies, experts say.
In a recent report, Clarivate noted outcomes-based agreements are gaining traction in the gene therapy space. This means reimbursement is tied to the real-world results. If the gene therapy fails, the company will be on the hook for part of the cost.
In many cases, insurers will weigh the cost of chronic treatments vs. the cost of a one-time gene therapy. A recent study found the pre-Medicare cost of sickle cell disease treatment is $1.6 million, according to the National Library of Medicine. But that analysis only includes patients with insurance who are age 64 and younger. And the health care costs for patients with severe forms of sickle cell disease can be much higher, says Alliance for Regenerative Medicine's Major. In comparison, Bluebird's Zynteglo costs $2.8 million.
Hemgenix, on the other hand, is calculated to cost the same as five years' worth of chronic hemophilia B treatments, according to the Clarivate report.
Sarepta's Ingram says the company's $3.2 million price tag for Elevidys is at the low end of the company's analysis examining the costs and benefits of Duchenne gene therapy. The company wanted to make sure Elevidys would be commercially viable before launching it.
"I can think of few things as tragic as having evolved our science to treat an untreatable disease, but because of impediments in the system, patients continue to die," he said.
Cost Of New Gene Therapies Vs. Benefits
For some diseases, it might be a no brainer to seek a gene therapy solution — but not all.
"If I said I can cure your headaches for the rest of your life for a million dollars, you'll think to yourself, 'Oh, aspirin is only like 20 cents. That helps cure the symptoms and I don't get the disease all the time,' " Clarivate's Kay said. "Is it worth the million dollars? In which case, it's a clear no."
This is why the companies behind biotech stocks have gone for the rare diseases.
Standard treatments for some genetic diseases aren't good enough to keep patients out of the hospital. And each hospital stay can cost thousands of dollars.
"Sometimes these rare diseases result in hospital care, additional therapy, surgery sometimes and these things are far more costly than a one-time treatment rather than trying to maintain someone's quality of life as best as possible," Kay said. "It's also better for the patient. Let's be fair. From a human level, it's better to have a one-time cure, if a one-time cure exists."
Guyer, of BioMarin, notes that hemophilia A treatment requires regular infusions of a protein called factor VIII. Even that doesn't completely stop bleeding episodes.
Eliminating the frequent infusions for hemophilia A patients "will be a huge step change, not just for us, but for patients in general," he said.
Will Investors Come Back To Gene Therapy?
Despite the promise, skepticism remains among investors in biotech stocks. Sarepta stock has fallen about 8% this year as of mid-September. BioMarin shares have skidded 11%. Bluebird stock has tumbled 52%, and the shares trade well below 10 a share.
The exception is Krystal Biotech, which gained approval in May for a gene therapy that treats a skin disease. This gene therapy isn't a one-time treatment and carries an expected annual price of $630,500. Shares have catapulted 56% year to date.
But experts say investors in biotech stocks could return to the gene therapy space.
In December, the FDA will consider another Bluebird gene therapy for sickle cell disease. The agency also is expected to sign off on the first CRISPR-based gene-editing drug from Crispr Therapeutics and Vertex Pharmaceuticals for sickle cell and beta thalassemia.
Five years ago, few people knew what gene therapies were. Many would have confused the word CRISPR for the drawer in the refrigerator dedicated to storing fresh produce. Today, investors are asking questions about genetic medicines, including how they work and who they could treat, says Clarivate's Kay.
"For an investor, that's looking a lot more interesting," he said. "This totally opens it up. This is one of the strongest changes in the dynamic of these technologies."
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
