BioMarin $700M Acquistion of Prosensa Comes Down to Attraction of RNA Therapeutics

Earlier this week, the scientist in me was shocked by the ~$700M acquisition of Prosensa by orphan disease company BioMarin for its Duchenne Muscular Dystrophy splice modulation candidate drisapersen.  My initial surprise was due to drisapersen being a drug that had not long ago gloriously failed a pivotal phase III trial, not least due to a questionable therapeutic index.  All this is not very surprising since drisapersen is based on antiquated oligonucleotide chemistry (2’-O-methyl phosphorothioate).

After a moment of reflection though, I have come to take a more positive view of the deal as it is actually a very bullish sign of the interest by the wider pharmaceutical industry in RNA Therapeutics.   This is because BioMarin is taking the gamble here that it will be able to argue its way to approval by pointing towards drisapersen having shown evidence that it can positively influence the splicing of the disease-causing gene, dystrophin.  So even if your clinical evidence of efficacy is anecdotal at best, it is difficult to argue with the notion that such evidence in combination with being able to positively impact the root cause of a disease is not an important step in treating an orphan disease of very high unmet medical need.

It should be clear to everybody that if drisapersen can get marketing approval, other exon 51 splice skippers with superior chemistries (many of which are pushing forward in development) will eventually replace it as best-in-class.  I would be surprised if BioMarin did not see it the same way, but similar to Roche acquiring Intermune for $8.3B for its IPF drug which had marginal efficacy in a severe disease of high unmet need, the rationale seems to be that being first-to-market in such pioneer indications will allow you to build a strong franchises in those areas.

It will be interesting to see whether this strategy pans out and BioMarin can get accelerated approval in 2015-6 based on some seemingly positive phase IIresults in combination with the dystrophin biomarker evidence.

Regardless, the $700M valuation and ~60% premium of the offer to its stock price is a powerful reminder that part of the reason what makes RNA Therapeutics so compelling is that it often allows you to drill down to the root cause of a disease.  From a commercial perspective this is particularly valuable in an environment favoring drugs for severe orphan diseases.

Biotech IPOs Show Wall Street Likes New Toys

The biotech sector is white hot these days, and as a result, the IPO window is wide open.  This is illustrated by the fact that preclinical companies like gene therapy outfit Bluebird Bio and Agios Pharmaceuticals have either just slipped through the window or are about to.   This is also illustrated by the fact that Duchenne Muscular Dystrophy (DMD) exon skipping company Prosensa is aiming at a valuation of $400M at its IPO despite the uncertainties around the approvability of its only product candidate that matters (endpoints and safety issues) and for which it has given away much of the financial potential to a Big Pharma (GSK). And the ticker: RNA.

As it relates to gene therapy and RNA Therapeutics companies IPOeing- in addition to Prosensa, small molecule RNA processing modulation Co. PTC Therapeutics and aptamer company Regado- a gap between the valuations of already public companies and those emerging from the obscurity of the private sector is becoming apparent.  Without meaning to talk down on Bluebird Bio or gene therapy, I am scratching my head as to why this early-stage company sports a $150-200M market cap (it priced above its guided range and popped 50% on the open) whereas a much more proven and clinically advanced lentivirus-based gene therapy company, Oxford Biomedica, is not valued at even a quarter of that.  

Given that Oxford Biomedica is developing drugs for medically important indications, especially for those affecting the eye and can be proud of a remarkable preclinical literature record, just as Bluebird Bio can, the difference cannot be product versus platform focus.  Or take for comparison preclinical microRNA Therapeutics company Regulus Therapeutics (2012 IPO) with a market cap of $350M and clinically slightly more advanced Arrowhead Research with a market cap of around $60M (disclosure: I own Arrowhead).   

Instead, I believe it shows the benefit of being able to stay out of the spotlight when valuations are severely depressed as they were in the wake of the housing crisis when research and having a pipeline were actually assumed to be liabilities, not assets.  Companies like Oxford Biomedica and Arrowhead Research may thus be viewed as damaged goods.  Only supposed best-in-class companies in the RNA Therapeutics space with a halo like Alnylam and ISIS Pharmaceuticals were able to decisively spring back from low valuations as sentiments improved.

By contrast, biotech networks such as the one around Third Rock have understood to wrap up biotech companies as exciting new toys for Wall Street to buy.   Orphan drugs anybody?  Of interest, Alnylam’s CEO John Maraganore has had an involvement with both Agios and Bluebird.  I give these individuals full credit for promoting innovation.   By the same token, the depressed valuations of some of the existing innovators are another example of the inefficiency of the public markets.

Sarepta Fails to Report Meaningful Dystrophin Expression Data, Falls Behind Prosensa

Restoring truncated, yet largely functional dystrophin in Duchenne Muscular Dystrophy (DMD) by exon skipping is a promising approach to this devastating disease.  For this, however, to have any meaningful therapeutic impact, it has been estimated that one would have to achieve about 20% of wild-type (probably somewhat higher for truncated versions) dystrophin levels in all muscle fibers.

Releasing 48-week data from one of the most manipulated clinical trials that I have seen, Sarepta Therapeutics just reported that treatment with their exon-skipping antisense morpholino eteplirsen resulted in 34-52% dystrophin-positive muscle fibers.  Impressive? I can’t tell, but what is more worrisome is that I don’t know why the company does not tell either.

Percent muscle fibers expressing dystrophin does not mean equal amount of dystrophin restored.

In a New England Journal of Medicine paper last year, Sarepta’s competitor Prosensa (with partner GSK) reported in a similar-sized study that in 10 out of 12 patients, the percent of fibers expressing dystrophin following treatment with their exon skipper PRO051 was between 60 and 100%.  Yes, 60-100% and nost just 34-52% as in Sarepta's case.

What is more, the immunofluorescence intensity and Western blot data in the Prosensa study showed that those fibers expressing dystrophin did so at much reduced levels compared to healthy muscle, on the order of 5-20% (overall bulk levels).  In other words, it is quite likely that the ~50% of fibers that express dystrophin in the Sarepta study together express at most 3-10% of normal dystrophin, well short of what is expected to be therapeutic.  It is also possible, however, that Sarepta’s assay is very sensitive such that even fibers with just 1% or so of wild-type signals were counted in. 

Given that stating the percent fibers expressing any dystrophin is almost meaningless, you have to wonder why Sarepta has not presented the data.

But then you ask, then why did the lame start to walk in the study (à 6 minute-walk-test data)?  Actually, I don’t believe that this was shown in the study either.  Just because this is a devastating disease in children does not mean that rigorous trial design and execution can be entirely done away with.  Yet, in this already tiny 12-patient, single-center (!), and open-label (!) study, the company wisely discarded the worst responders early on allowing the 6 MWT numbers to be 'statistically significant'.   There seemed to be more subgroup analyses presented than patients in the study.  If I were a regulatory agency, I would strongly consider refusing to even just look at the 6 MWT data.

Why am I writing this?  First of all, I am obviously trying to find any shares to short.  And second of all,  what really irks me is that as orphan drugs become more and more popular in drug development, a number of companies are doing away with rigorous science, drive aggressive patient recruiting and disease awareness campaigns (best if a pediatric indication is involved), and expect the rest of us to subsidize the enormous costs of these drugs.  Fine, if the drugs worked, but not for placebos.  Wait another 5-10 years and there will be an enormous backlash and those that need access to these drugs will suffer the most.