We are investing more in gene therapies

Getting in early when an investment opportunity starts taking off with massive upside potential is every investor‘s dream, but often that also exposes investors to unexpectedly high risk. In the health industry, gene therapies seem to be up and coming, but many of these approaches are in early clinical development and will take years to reach the market, if they even get that far. The big blockbuster drugs dominating the pharmaceutical market for much of its history have clearly been based on chemical substances. In the last two decades, these agents have increasingly been displaced by biologics (therapeutic agents manufactured in a living system such as microorganisms, plants, or animal cells) – evident from the fact that eight of the current top ten best-selling drugs were developed on the basis of antibodies and therapeutic proteins.

The share of genetic therapies in last year's record number of 59 drug approvals in the USA is still low. What other factors do you consider to justify the attractiveness of this area?

The low approval rate for new technologies is due to the generally long drug development cycle. The increasing investments in gene therapy development candidates are reflected both in the large number of clinical studies and in the statements made by Scott Gottlieb, the recently resigned head of the US regulatory authority, who expects an increasing number of approvals for genetic products in the coming years. In addition to the promising potential and the incentive to make serious diseases treatable with a single therapy, acquisitions of pharmaceutical companies at high premiums are generating additional interest. In 2018, Novartis acquired the gene therapy company Avexis for USD 8.7 billion, and Roche recently announced its intention to purchase Spark Therapeutics for USD 4.3 billion.

What exactly do gene therapies do?

To put it simply, gene therapies are designed to replace a missing or defective function of disease-causing proteins with a single treatment regimen in the long term. The majority of previous drugs aimed to block these proteins only temporarily. Gene therapy, on the other hand, achieves a stable effect, sometimes over years, but without integrating into the human genome. The even more complex technology of gene editing, on the other hand, aims at permanently altering the human genome in cells and organs and thus correcting existing errors or replacing missing information.

That sounds promising. Are there any risks?

In addition to the potential, there are also risks and challenges such as long-term safety, dosage of the single dose, efficiency in achieving target organs and cells, integration into the human genome in gene edits and the initially high production costs. With BB Biotech, they have already been investing for some time in various companies that focus on gene therapies. We started with the highly successful investment in Avexis, which was acquired by Novartis in 2018. After that, the portfolio initially focused on Voyager Therapeutics, before adding more companies with genetic therapies to the portfolio in Q4 2018, including Audentes and Sangamo. The investments were further expanded in the first quarter of 2019. We also added two new companies to our portfolio. First, Crispr Therapeutics, a pioneer in Cas9 genome editing, is conducting a study with Vertex on CTX001 in patients with hemoglobinopathies such as beta thalassaemia and sickle cell anemia. Crispr is also driving its next-generation allogeneic cell therapies for early clinical development, primarily in cancer. The second new investment is Homology Medicines, which is currently building a pipeline for gene therapy and gene editing. In the field of gene therapy, HMI-102 is the company's lead compound in adults with classic phenylketonuria (PKU). In the field of gene editing, Homology Medicines is dedicated to the development of HMI-103 for children with PKU.

What proportion of the portfolio do these investments now account for?

At the end of March 2019, we had invested approximately 4% of our portfolio assets in this important sub-sector for new technologies. We are convinced of the potential of these therapies for patients and the healthcare system and are entering this market with determination and caution. Although these specialists are making increasing progress in the field of gene therapy and gene editing, it is worth mentioning that their drug candidates are only in the early clinical phase.

You have invested around 25% of your portfolio assets in companies that are active in the field of RNA therapies. What is it that convinces you about this technology?

In our opinion, RNA-based therapies have receded somewhat into the background due to the fantasy driven by takeovers in the area of genetic therapies. We use various genetic building blocks to selectively increase or reduce the production of proteins without affecting the human genome. The substances developed can be used in many indications, ranging from metabolic disorders and genetic rare diseases to cancer, infectious diseases and nerve diseases.

In which companies are you invested?

Our largest subsidiary Ionis Pharmaceuticals, for example, has established itself as a global pioneer in antisense technology and has more than 30 candidates in the development pipeline.

 

Gene therapy companies in BB Biotech's portfolio

1.3%

Audentes

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Audentes

1.3%

Audentes is a clinical stage gene therapy company focused on rare diseases. The company has two clinical stage programs and importantly, commercial scale, in-house manufacturing capability that is GMP-approved. AT132 is the lead product in Phase I/II for the treatment of X-linked myotubular myopathy (XLMTM). The second clinical compound is AT342 in Phase I/II for the treatment of Crigler-Najjar syndrome (CN), but the drug needs to be dosed higher as the first patient data at the lowest dose saw a return to baseline following a reduction in the target. Beyond the two lead assets, there are two preclinical compounds and a yet to be named compound. Given the data seen so far with the lead asset, the company will discuss the regulatory path with the FDA and present the data, which we believe have established proof of concept thus far, with durability being the main question. The manufacturing facility has 2 500 liters bioreactors with additional capacity of up to 5 000 liters. The same process, facility, and scale have been used from the beginning which is a very important factor in the regulatory process. The manufacturing process uses a mammalian, serum-free suspension culture which allows for increased scalability versus adherent cultures.

0.7%

Crispr Therapeutics

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Crispr Therapeutics

0.7%

Crispr Therapeutics AG is a company with the main part of its operations in Boston, MA. The Company focuses on the development of transformative gene-based medicines for serious diseases using its Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR)/Cas9 gene-editing platform. CRISPR/Cas9 can be programmed to cut, edit and correct disease-associated deoxyribonucleic acid (DNA) in a patient’s cell. The location at which the Cas9 molecular scissors cut the DNA to be edited is specified by guide ribonucleic acid (RNA), which is comprised of a crRNA component and a tracrRNA component, either individually or combined together as a single guide RNA. The Company has business operations in London, the United Kingdom, as well as research and development operations in Cambridge, the United States. Among the CRISPR companies, CRISPR Therapeutics is unique in being the first having entered the clinic (in late 2018) and specifically focussing on ex vivo applications. CTX-001 is in the clinic in Europe for Transfusion-dependent Beta-thalassemia and in the US for Sickle Cell Disease (profit sharing for both programs with VRTX). CRISPR Therapeutics is the only gene editing company having retained full rights for its allogenic CAR-T programs, they are specifically pursuing CD19, BCMA and CD70 as initial targets and entering the clinic in early 2019. Further it has structure a JV with Bayer named Casebia that concentrates on in vivo applications ($300mn deployed by Bayer) as well as a regenerative medicines pact with Viacyte to de-immunize its synthetic pancreas device with gene editing technology.

0.1%

Homology Medicines

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Homology Medicines

0.1%

Homology Medicine is a genetic medicines company with a proprietary platform based on AAV vectors derived from human CD34+ cells, known as AAVHSCs (FIXX has 15 different capsids). Sequence analysis has mapped AAVHSCs to Clade F, which also has AAV9 as one of its members. The company is building both a gene therapy and gene editing pipeline based on this technology which they licensed from City of Hope. It is believed that the vectors will be less immunogenic, have natural tropism for desired human tissues, and increased efficiency for homologous recombination. Its lead program is HMI-102 which is an AAVHSC8 vector containing the human phenylalanine hydroxylase (PAH) gene and a liver specific promoter being developed for classic Phenylketonuria (PKU) patients (Phe > 1,200 µmol/L). PKU is an inborn error of metabolism where there are mutations in the PAH gene resulting in the inability to metabolize Phe, which can result in severe neurological impairment. Preclinical models in the established and commercially validated ENU2 mouse model have generated encouraging data leading the company to start a Ph I/II proof-of-concept study in 2019 with inital proof of concept data by year-end 2019. The first gene editing program HMI-103 leverages the same delivery vehicle (AAVHSC) as its gene therapy relative HMI-102, but excludes a promotor and flanks the transgene with two homology arms to drive integration of the transgene into a specified region by homologous recombination. This poses an inherent safety advantage in comparison to other gene editing technology that have to create single- or doubles strand-breaks in the patient DNA by cutting with an endonuclease (Cas9 or Fok-I), which mainly trigger error-prone no-homologues end joining (NHEJ) for repair as well as have higher associated risks of off-target cutting and on-target effects (large genomic rearrangements or deletions). The drawback is lower editing efficiency due to lack of endonuclease cutting.

0.6%

Sangamo Therapeutics

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Sangamo Therapeutics

0.6%

Sangamo Therapeutics is uniquely positioned as the dominant and almost exclusive holder and developer of Zinc-finger-based genomic editing (ZFN) IP. One of the key achievements of the new CEO on the pharmacological side was the manifold improvement in selectivity of the ZFN platform (100x), thereby pushing off-target cutting below the limit of detectability, which enables the company to conduct the first in vivo gene-editing clinical trial (MPS II). Further the company now also pursues classic gene therapy approaches through the formulation expertise (that they gained while delivering ZFN) and IP around AAV2/6 (AAV6 capsid with AAV2 promotor/genome), e.g. in haemophilia A (Phase I/II running) as well as Fabry’s disease (IND). It will be key for Sangamo to successfully develop their ZFN platform for their first proprietary projects (MPS I, MPS II, hemophilia B) and based thereon deploy that or newer generations of ZFN into further liver albumin locus targeting applications, while reaping the optionality from partnered projects (hemophilia A with Pfizer, ex vivo collaborations with Bioverativ and Kite, gene regulation ZFP without nucleases with Shire and Pfizer).

1.4%

Voyager Therapeutics

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Voyager Therapeutics

1.4%

Voyager is a clinical-stage biotech company focused on developing novel genetically targeted therapies to treat CNS diseases. The company’s lead asset, VY-AADC, is an AAV-based gene therapy with the objective of increasing the expression of the enzyme responsible for converting levodopa to dopamine (AADC, L-amino acid decarboxylase) in the brains of Parkinson’s disease patients. VY-AADC is currently enrolling patients in a Phase II trial, which will serve as the first of two sham-controlled studies for registration. A Phase III study to begin in 2020 will serve as the second pivotal trial. The company is also developing other AAV vectors targeted at increasing expression of a key gene in Friedreich’s ataxia, delivering monoclonal antibodies, or silencing/knocking down genes using microRNA delivery in diseases like monogenic SOD1 familial ALS and Huntington’s disease. Voyager’s discovery engine has generated programs in five CNS indications, and in the next 18 to 24 months, they plan to initiate at least three other clinical programs.