Gene Therapy: Commercial Challenges and Strategic Choices

Executive Insights Volume XXI, Issue 38 Gene Therapy: Commercial Challenges and Strategic Choices Innovation in gene therapy brings the potential Luxturna, indicated for the treatment of an inherited form of vision loss, became the first in vivo gene therapy approved in for transforming patient care and obviating the the U.S. Further, gene therapy assets from AveXis for spinal need for chronic therapy through single-dose cures. muscular atrophy, BioMarin for hemophilia A, and Nightstar for Despite the potential long-term benefits of this new choroideremia, among others, have advanced to pivotal trials (or have been filed for approval) after demonstrating attractive therapeutic modality, gene therapy companies face earlier-stage data. a number of underappreciated challenges. Building on these successes, large pharmaceutical companies are investing heavily in gene therapy (e.g., Pfizer’s gene therapy deals While there have been recent curative achievements in hepatitis C with Bamboo and Sangamo, Novartis’ acquisition of AveXis, and virus treatment, curative small-molecule or biologic therapies Roche’s agreement to acquire Spark). Meanwhile, venture capital are uncommon. After three decades of hopes tempered by firms continue to fuel the creation of novel gene therapy platforms setbacks, gene therapy (the process of transferring exogenous and approaches, leading to continued expansion of the gene therapy protein-coding nucleic acids into cells to ameliorate a disease pipeline (see Figure 2). state through restoration or augmentation of host gene function) is poised to make curative1 therapies a routine approach for This momentum, coupled with scientific, clinical and manufacturing managing diseases. advances, suggests gene therapy will play an important role in managing diseases driven by specific genetic mutations. However, this Gene therapies, including both in vivo (i.e., intravenous new treatment paradigm will challenge biopharmaceutical companies administration of a viral vector carrying a gene for a missing or to evolve their traditional business models to better serve patients, faulty protein) and ex vivo (i.e., genetic manipulation of harvested providers and payers with this complex, novel therapeutic model. cells before administering them to the patient) approaches (see Figure 1), are starting to reach the market with pronounced, Gene therapy commercial challenges long-term impact after a single administration. The FDA recently The fundamental value proposition of gene therapy is long-term approved Novartis’ CAR T-cell therapy2, Kymriah, followed efficacy with a single-dose treatment. This novel treatment closely by Gilead’s CAR T-cell therapy, Yescarta, for hematology approach introduces a number of unique challenges for gene oncology conditions. At the end of 2017, Spark Therapeutics’ therapy companies. Gene Therapy: Commercial Challenges and Strategic Choices was written by Ricardo Brau and Pierre Jacquet, Managing Directors in L.E.K. Consulting’s Life Sciences & Pharma practice. Ricardo and Pierre are based in Boston. For more information, contact [email protected]. Executive Insights 1. Fast depletion of addressable populations Figure 1 Overview of gene therapy modalities and related indications The achievement of a functional cure or the generation of antibodies against a delivery vehicle (e.g., a virus) is expected to Illustrated mechanism Mechanistic details/applications limit gene therapies to a single dose per patient. An inability to In vivo gene therapy re-treat would lead gene therapies to deplete their addressable Related viruses: • Adeno-associated viruses (AAV) prevalent populations (see Figure 3). As the number of treated Example indications: patients accumulates, the number of potential patients who • Spinal muscular atrophy (SMA) • Retinitis pigmentosa (RPE65) could be treated in a given year is reduced. This leads to demand Gene is packaged that peaks early before steadily declining. Once the prevalent into a viral vector (e.g., AAV) Transgene is population is depleted, demand for a gene therapy would be delivered directly driven by incident patients. to the body While slow uptake of a gene therapy could make the demand Ex vivo gene therapy Related viruses: “bolus” less pronounced, patient depletion would still inevitably Delivery cells • Lentiviruses (LV) occur, and incident populations would still drive long-term demand. derived from Example indications: patient • Beta-thalassemia (B-thal) This is mainly a challenge for conditions with addressable prevalent • Various cancers (via ACT*) populations that are large relative to the incident population. Many Gene is packaged into a viral vector diseases being targeted by gene therapy fit this description. Delivery cells Cells multiplied (e.g., lentivirus) are genetically and delivered In contrast, therapies that focus on conditions driven by incident modified by to patient viral vector populations will likely have more stable long-term demand (in the absence of new market or competitive events), as the addressable Note: *ACT = Adoptive cell therapy patient population is renewed every year. Unfortunately, outside Source: aSharedVision (Spark); L.E.K. research and analysis of oncology, the number of indications that are mainly driven by incident populations is relatively small, suggesting dynamics related 3. Challenging gene therapy franchise sustainability to the depletion of addressable populations will be a hallmark issue The “bolus-like” revenue curve associated with a first gene for gene therapies. therapy presents a challenge to achieving sustainable growth 2. Complex market access dynamics given the lack of a stable base from which to build. Revenue will wane naturally as the addressable population is depleted a few Price points for recently launched gene therapies have fallen short years after launch. The short duration of meaningful revenue of expectations. For example, prior to the launch of Kymriah, contributions from a single gene therapy product suggests industry participants projected a price of $600,000 to $750,000 the timing of life-cycle management efforts and other product per patient. However, the actual price of Kymriah at launch was launches is critical. $475,000 per acute lymphoblastic leukemia patient. Spark’s Luxturna, which was able to achieve a relatively high price of Achieving growth would require launching another revenue $850,000 for the treatment of both eyes, fell short of the $1 stream (e.g., another gene therapy product) before the revenue million+ price point expected by the market. of the first gene therapy starts to wane. This would lead to a situation in which the revenue peaks overlap, potentially resulting Payers are hesitant to pay high up-front costs for these therapies. in substantial growth. However, maintaining growth would This is partly due to the fact that curative therapies do not yet require launching a product every few years. Beyond the question have a long-term track record of sustained efficacy. Under one- of whether a biotech company would have the portfolio breadth time payment models, there is a profound misalignment of short- or resources to launch several products within a few years of each term costs of gene therapy that would be borne by payers and other, it would be challenging to optimally time the launches of long-term benefits accrued by patients. Payers are often hesitant subsequent gene therapies. to entertain one-time payments that are more than threefold to fivefold the cost of the existing standard of care. Furthermore, Key strategic choices for winning in gene therapy they are concerned with having to pay up front for a treatment As the gene therapy landscape continues to mature, that would provide benefits to a patient beyond his or her stay on biopharmaceutical companies need to make a number of their plan (typically less than five years). strategic choices to drive success, given the commercial challenges articulated above. Page 2 L.E.K. Consulting / Executive Insights, Volume XXI, Issue 38 Executive Insights Figure 2 Gene therapy clinical pipeline evolution Gene therapy clinical development by year, worldwide (2010-18) Number of assets by phase 750 500 250 0 2010 11 12 13 14 15 16 17 18 Preclinical Phase I clinical trial Phase II clinical trial Phase III clinical trial Launched Source: L.E.K. research and analysis of pharma projects 1. Mix of indications of indications, as well as the existing and emerging competitive environment. Ultimately, biotech companies should pursue As discussed, the nature of the addressable population for a given indications for which they feel they have a competitive advantage indication can have profound implications for the future demand relative to other players in the space. for a gene therapy. Indications driven by incident populations are expected to lead to more-stable demand, while those driven by 2. Technology risk diversification prevalent populations could see declining demand after an initial peak. Today, this mainly presents a choice between oncology Most biotech companies focused on gene therapy are formed and nononcology indications. Given the short survival spans for around a specific technology platform (e.g., novel viral capsid patients with advanced and metastatic cancer, the addressable that could have preferential uptake in an organ system). Most population is driven by the annual number of incident patients. then proceed to de-risk the technology as quickly as possible With the exception of a limited set of indications that

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