Audentes Therapeutics Inc. CEO Matthew Patterson early last month characterized results with lead compound AT-132 in X-linked myotubular myopathy (XLMTM) as “unprecedented in neuromuscular disease,” and the value apparently wasn’t lost on Tokyo-based Astellas Pharma Inc., which signed a deal worth about $3 billion to take over the company.
Shares of Audentes (NASDAQ:BOLD) closed at $58.93, up $30.32, or 106%, on word of the buyout – which pairs the two firms’ gene therapy expertise and is slated to close in the first quarter of next year – at a cost of $60 per share in cash. The BLA submission for AT-132 in XLMTM is on track for mid-2020 and San Francisco-based Audentes planned to seek marketing authorization in the EU in the second half of next year.
In October, at the Congress of the World Muscle Society in Copenhagen, Audentes offered updated positive data from the phase I/II study called Aspiro. In the first seven treated patients, six in cohort one and the first treated in cohort two were ventilator-independent, with four patients walking on their own or with support. “These outcomes stand in stark contrast to the natural disease course of XLMTM,” Patterson pointed out. AT-132 continued to be well-tolerated with a manageable safety profile across both cohorts. The company was “able to identify two additional patients who met the study criteria, bringing the total planned enrollment to 10 patients, or five age-matched treatment and delayed-treatment control pairs. We expect to imminently complete enrollment of the final patient,” he said.
XLMTM primarily affects skeletal muscles and occurs almost exclusively in males. People with this condition have muscle weakness and decreased muscle tone that are usually evident at birth, affecting the development of motor skills as well as eye movement, facial impairment and absent reflexes, or areflexia. Normal bone development can be disrupted, leading to fragile bones, an abnormal curvature of the spine, and joint deformities of the hips and knees. Liver disease, recurrent ear and respiratory infections, or seizures may also be part of the picture. Because of their severe breathing problems, people with XLMTM usually survive only into early childhood, though some have lived into adulthood, according to the NIH.
This spring, Audentes broadened its efforts beyond adeno-associated virus-based gene therapy, bringing aboard expertise from Nationwide Children's Hospital and its own team to develop new vectorized antisense therapies for Duchenne muscular dystrophy (DMD) and myotonic dystrophy type 1 (DM1). The agreement expands the company's portfolio with two preclinical programs: AT-702 is an exon 2-skipping candidate for DMD, and AT-466 is an RNA knockdown and exon-skipping candidate for the treatment of DM1. Audentes’ core technology involves gene replacement as a way of attacking XLMTM and Pompe disease.
The buyout of Audentes represents a furtherance of Astellas’ “focus area approach” whereby the company searches for new approaches to unmet medical needs by finding combinations of biology and therapeutic modality/technology based on emerging science. With the deal to take over Audentes, the company adds a fifth such area: genetic regulation, whereby Astellas said it aims to make gene therapy a key driver of the company’s future growth.
Wainwright analyst Debjit Chattopadhyay liked the arrangement, noting in a report that the deal represents a 109% premium to Audentes’ closing price yesterday and a 44% premium to its 52-week high. “While the market was far from sanguine on the commercial prospects of XLMTM, we had repeatedly emphasized the quality of the data, the pricing precedence, and importantly, the in-house commercial-scale manufacturing as key differentiators,” he wrote, adding that he was “not overly surprised by this move from Astellas, as it takes a plunge into the rare disease, gene therapy segment. In a sector dominated by short-term trading, one man's no catalyst trade is another's access to late-stage pipeline and manufacturing know-how,” in his view.
‘Distant’ pipeline overlap, analyst says
Mizuho’s Difei Yang was on board, too. The premium price paid by Astellas “is fair in our view. As we have highlighted previously, Audentes made the important strategic move of investing early on in its own manufacturing capabilities,” she wrote in a report. “Today, the company is well-positioned with manufacturing capacity to cover global commercial demand for XLMTM, as well as initial clinical development product needs in bigger indications such as Pompe (enough material for the entire phase I/II study), DMD and DM1.”
Astellas’ other entries into gene therapy include the summer 2018 buyout of Cambridge, U.K.-based Quethera Ltd., targeting treatments for ocular disorders such as glaucoma. Up-front and contingent payments totaled up to £85 million (about US$110.5 million). Quethera became a wholly owned subsidiary of Astellas. Also, in February 2016, Astellas and Miyagi, Japan-based Clino Corp. entered a license agreement for the worldwide development and commercialization of a gene therapy to treat retinitis pigmentosa. About five years ago, Astellas disclosed a research collaboration with an investigator at Harvard Medical School in Boston focused on discovering the pathologic mechanism for retinitis pigmentosa and identifying new therapeutic targets.
SVB Leerink analyst Joseph Schwartz called Astellas’ choice in Audentes “stellar.” In a report, he conceded that investors taking into account the still-ongoing $4.8 billion acquisition by Basel, Switzerland-based Roche Holding AG of Spark Therapeutics Inc., of Philadelphia, could regard the Astellas-Audentes pact as “another potentially drawn-out and uncertain tie-up. However, our review of Astellas' product portfolio and R&D pipeline suggests minimal overlap with Audentes’ focus on neuromuscular diseases. In fact, we identified just two drug candidates – ASP-0367/MA-0211 and reldesemtiv/CK-2127107 – targeting neuromuscular diseases (DMD and spinal muscular atrophy) that may present some overlap, however distant.