Blog | 3/1/2024
Gene Therapy Outlook for the US Market into 2024 and Beyond
By Tom Fitzsimons, Ned Wydysh, PhD, and Vivek Mittal, PhD
Introduction
The landscape for gene therapies is rapidly evolving as the field, which remains in its infancy, begins to mature. A robust pipeline of innovative and paradigm-shifting therapies sets the stage for a highly transformative period. A period that, if measured by a surge in approvals, may have already begun.
Starting with the approval of Luxturna in 2017 and continuing through 2022, the FDA approved a total of five gene therapies for rare genetic diseases. However, in 2023 alone, five additional gene therapies were approved, including the first ever therapy utilizing CRISPR genome editing technology. This growth is expected to continue through 2024 with FDA and industry officials predicting a “breakout year” for gene therapies, which could equate to an additional five approvals.1
Despite this growing momentum and strong pipeline of gene therapies, the sector has not shaken the effects of a broader sector downturn and hesitation from investors. Gene therapies that are approved often struggle to achieve expected commercial benchmarks, and the sector is still plagued by low adoption rates, access hurdles, manufacturing challenges, and other barriers.
These struggles are not surprising for such a nascent field of technology, but it does beg the question of what event, or events, will usher in this next phase of growth for the gene therapy market? Is there a catalyst for this anticipated “breakout”? If so, what is it, and when can we expect it?
Post-Pandemic Downturn and Current State of Capital Markets
In terms of the economic environment in biotech, 2023 largely picked up where 2022 left off. Public and private markets remain relatively tepid, and valuations have yet to rebound. Entering 2024, The S&P Biotech Index (XBI) is down almost 50% since its 2021 peak, while the S&P 500 has gained almost 25% during the same timeframe. Overall dealmaking numbers are also well below 2021 highs, with investor hesitation stemming from macroeconomic uncertainty and a desire to lower exposure to higher-risk early-stage programs. In Q4 2023, the number of total transactions across all venture rounds, IPOs, licensing deals, and M&A was less than half of the total in Q4 2022:2
Despite recent approvals and positive headlines, gene therapy companies have not avoided the broader market correction. The number and value of cell and gene therapy licensing deals has also declined significantly since 2021 highs:2
As a result of the downturn, investment strategies for advanced therapies have shifted. In this new environment, investors and big pharma are much more selective in their backing or acquisition of platform and early-stage biotechs. At JPM, MPM BioImpact Managing Director Christiana Bardon highlighted this shift towards more validated programs: “People with a platform that is five years away from the clinic, that’s just not going to fly in this environment whatsoever, but if you have a Phase 2 asset that’s coming into the clinic for a great indication, you’re going to do fine.”3
Based on investor responses to certain data readouts, it would appear that the bar for clinical validation is as high as ever for gene therapies. Back in June 2023, uniQure released interim data from its phase 1/2 trial of AMT-130 in Huntington’s disease. The data showed a manageable safety profile and an improvement in total motor score across both treatment arms. However, investors scrutinized confusing biomarker data that indicated inconsistent reduction of mHTT and neurofilament light chain levels at high and low doses. UniQure attributed the contradictory findings to assay limitations and confounding factors, but shareholders were clearly not convinced, and shares fell 45% on the news.4 It is highly unlikely that a similarly inconclusive readout would have elicited the same market response even just a couple of years ago.
Current Gene Therapy Pipeline
2024 is poised to be another eventful year for the gene therapy sector, with several highly anticipated assets approaching development and regulatory milestones. Despite the difficult macroeconomic environment and hesitancy from investors, the global pipeline for gene therapies remains relatively healthy. The rapid increase of assets in preclinical development has expectedly slowed, and the number of clinical-stage assets has plateaued. As of now, industry-wide news of consolidating portfolios and program discontinuations has, for gene therapies, translated into more of a slowing of growth rather than dropping off a proverbial cliff.
In recent years, the FDA has also taken significant steps to facilitate and expedite the development and approval of gene therapies. In a recent webinar hosted by Genetic Engineering & Biotechnology News, CBER Director Peter Marks was asked about the FDA’s motivation behind launching the START pilot program on top of existing programs such as orphan drug and breakthrough therapy designations, accelerated approval, and rare pediatric disease vouchers. Dr. Marks had this to say in response:
“Even though we have a car that is reasonably fast, we want to turbocharge it. Each of those programs has helped move therapies for rare and genetic diseases forward, but current meeting timelines – even for therapies with breakthrough designation – are often 30-60 days. If you are a small company with 4-6 quarters of cash on hand, and it takes a quarter to have a round robin interaction with the FDA to get an answer to a fundamental question, that isn’t optimal. If we can further cut timelines [and provide answers sooner], there will be more money to be spent effectively on development… There has been a bit of a valley of death for gene therapy products, particularly those targeting only 25-100 individual treatments per year in the US. It would be nice if we could help nurture these products along and get them across the finish line.”6
Earlier this year, the FDA also announced initiation of the Collaboration on Gene Therapies Global Pilot (CoGenT Global).6 This program provides a framework for concurrent submission and review of gene therapy products among international regulators, further demonstrating the organization’s desire to support development of gene therapies.
Interestingly, historical data indicates that gene therapies already have a significantly higher probability of technical and regulatory success when compared to drugs of other modalities:1
What is not entirely clear is how much of this success can be attributed to an increasingly attractive regulatory environment versus inherent qualities of expensive advanced therapies with well-defined targets. Until novel gene therapy platforms are further validated and development costs are reduced, manufacturers and investors will continue to forego more shots on goal in favor of a more targeted and careful approach.
The addressable patient population for approved non-oncology gene therapies has grown from roughly 34,000 patients in the US and EU to almost 60,000 patients with the approvals of Casgevy and Lyfgenia for sickle cell disease (SCD). There are, however, certain gene therapies in late-stage trials that target eye conditions and diabetic complications; indications that could expand this addressable population to millions of patients.
These new indications provide an opportunity for gene therapies to enter an unprecedented next phase of growth. But to do so, these products will need to attain a level of commercial success that existing gene therapies have yet to achieve.
Lingering Commercial Headwinds and New Hurdles
Much of the overall hesitancy and increased skepticism associated with the gene therapy sector stems from the fact that the modality has, to date, failed to meet commercial expectations. There are currently nine viral vector-based gene therapies on the US market, and only one – Zolgensma – has exceeded annual worldwide sales of $500MM.7 Some recently approved gene therapies are also expected to eventually reach this milestone, but historically the sector has significantly underperformed forecasts:8
Notably, the therapies that have exceeded 2019 forecasts, or missed by the smallest margin, are in vivo gene therapies. The therapies that have missed prior forecasts by the largest margin are ex vivo genetically-modified cell therapies. This is not entirely surprising as ex vivo therapies are associated with greater logistical challenges and patient burden due to required conditioning regimens. Expectations for rapid patient uptake and immediate revenue will need to be adjusted, especially for ex vivo therapies.
There are a multitude of other factors that have contributed to this general lack of commercial performance, including but not limited to patient/physician reluctance, difficult treatment regimens, durability and safety concerns, market access hurdles, manufacturing delays, and patient-side operational challenges. It would be impossible to address all these factors in a single blog post. However, much of what the sector is grappling with can be encapsulated by simply taking a closer look at the recent history of a prominent gene therapy company – bluebird bio.
bluebird bio Case Study
With the recent approval of Lyfgenia in December, bluebird bio now has three FDA-approved gene therapy products, more than any other individual manufacturer. Despite the approvals, bluebird is currently trading with a market cap of under $200MM – a small fraction of its $10B+ peak back in 2018, years prior to any approvals. This decline in valuation despite winning multiple approvals poses an obvious question; how did this happen?
The first contributing factor is related to pricing and access. In 2019 and 2021, the EMA approved bluebird’s Zynteglo and Skysona for beta thalassemia and cerebral adrenoleukodystrophy, respectively. However, after failing to reach an agreement on pricing with authorities, both products were pulled from European markets. Andrew Obenshain, now CEO, at the time stated that “bluebird’s decision to focus on the U.S. market is driven by the challenges of achieving appropriate value recognition and market access for Zynteglo in Europe, which makes bringing its transformative gene therapies like Zynteglo and Skysona to patients and physicians in Europe untenable for a small innovative company at this time.”9 In the EU, reimbursement decisions are made individually by member state governments, who often have single payer healthcare systems. This affords European countries much greater drug price negotiating power and has led cell and gene therapy manufacturers to prioritize the US market.
Bluebird proceeded to shift commercial operations for Zynteglo and Skysona to the US and has not yet announced plans to market Lyfgenia in Europe. In general, the US represents a much more favorable reimbursement environment for gene therapies. Until the passing of the Inflation Reduction Act (IRA), the US government did not possess the ability to negotiate drug pricing directly with manufacturers, and current gene therapies are unlikely to be affected by current provisions anyway. Despite the sticker shock of recently approved gene therapies with list prices exceeding $3M, the Institute for Clinical Review (ICER) has taken a fairly positive stance on the economic value of gene therapies for rare disorders as a whole:10
Still, bluebird has faced strong criticism from stakeholders after announcing a list price of $3.1M for Lyfgenia in December of last year. This price point far exceeded ICER’s health-benefit price benchmark for sickle cell disease (SCD) of ~$2M. However, the benchmark is notably calculated as net price after discounts. Vertex and CRISPR Therapeutics’ SCD therapy, Casgevy, conversely received a much more favorable response to its $2.2M list price, which represents a 40% discount compared to Lyfgenia.
At JPM 2024, Obenshain defended Lyfgenia’s pricing strategy, stating that “You can’t just compare the $3.1M to the $2.2 million; you have to do [the comparison] with the fact that you only pay if it works,” referring to the outcomes-based contracts that bluebird is offering to payers.11 Vertex and CRISPR have yet to share specifics on their reimbursement strategy for Casgevy, but they are also expected to leverage outcomes-based contracting. On a positive note for bluebird, the company has demonstrated an ability to effectively negotiate with payers, recently signing agreements for Lyfgenia that cover roughly 200M US lives. At JPM 2024, Vertex also announced a reimbursement deal for Casgevy with Blue Cross Blue Shield, covering 100M lives.11
On top of pricing and access considerations, and potentially most concerning for bluebird, is the fact that Lyfgenia was approved with a black box safety warning for risk of hematologic malignancies. Casgevy, on the other hand, received no such label. Bluebird has downplayed safety concerns, stating that commercial Lyfgenia is now produced through a different production process and that doctors already knew about the adverse event cases and associated risks. Physician surveys conducted by J.P. Morgan and Leerink Partners do support this notion, indicating that a significant majority of doctors saw little to no difference in safety and efficacy between the two therapies.12
If bluebird does possess an advantage in the SCD market, it would be its ability to leverage its existing infrastructure and market experience. The company asserts that it has an 18-month commercial head start due to Zynteglo launch synergies and prior engagement with the same treating physicians, same treatment centers, and same payers.13 Bluebird expects all 48 of its established Zynteglo treatment centers to be ready to administer Lyfgenia by the end of Q1 2024.14 Analysts note that bluebird’s existing experience in patient side operations is a market differentiator and will substantially reduce commercialization capital requirements. It remains to be seen how significant of an advantage bluebird’s site readiness affords the company, however, Vertex’s extensive commercial experience and financial resources mean that this gap could close quickly.
The SCD market battle between Lyfgenia and Casgevy is shaping up to be a make-or-break moment for bluebird with wide reaching implications for the sector as a whole. SCD represents a much larger patient population than other rare genetic diseases with available gene therapy treatment options. Manufacturing and commercial infrastructure will need to be established at a larger scale and reimbursement negotiations will dictate commercial viability. At a company level, various competitive forces are also at play. Stakeholders are watching intently, as commercial success or failure for either product will help inform development and commercialization strategies for future gene therapies.
Next Phase of Gene Therapy Market Maturity
We opened by asking what the growth catalyst would be for the gene therapy sector — what development could bring back investor confidence in the market, solidify commercial viability, and expand applications of gene therapies? The answer is clearly not a single event or approval. Instead, it is likely to be a culmination of approvals, technological advances, evolving business models, shifting perceptions, and other factors that collectively contribute to a maturing market returning to growth.
Unfortunately, certain macroeconomic drivers are out of the control of anyone in gene therapy and biotech. High cost of capital is a large reason for the deal flow and investment downturn, and the Fed has elected to hold interest rates steady through the first rate meeting of 2024. Rate cuts are expected later in the year, but exact timing and numbers remain to be seen.
Still, the pipeline of gene therapies remains strong and diverse, with potentially transformative technology platforms like base and prime editing entering and approaching the clinic. New indications also bring the potential of growing addressable populations by orders of magnitude. The FDA itself continues to adapt alongside the sector and has demonstrated a desire to enable further innovation through a variety of programs.
Recently approved medicines like Casgevy, Lyfgenia, Roctavian, and even Elevidys will be closely watched as potential indicators of the market’s readiness to recognize the value of gene therapies. The commercial success of either SCD therapy will signal that despite manufacturing difficulties, operational complexity, and difficult treatment regimens, ex vivo gene therapies remain a valuable solution for patients with severe disease burden and poor standard of care. It is highly likely that site-readiness and market education will translate into increased adoption. This success is also contingent on achieving access in a largely underserved patient population that, justifiably, may be distrustful of new treatments. SCD will inevitably help put a spotlight on how much further perceptions need to shift for gene therapy to solidify its place in mainstream medicine.
Roctavian and Elevidys hope to achieve some level of success seen by fellow AAV-therapy Zolgensma. These in vivo therapies do not encounter all the same logistical hurdles as the cell-based gene therapies, but they still face skepticism regarding efficacy, durability, and safety. For these therapies to realize their potential, it will be vital that manufacturers clearly articulate which patient populations derive the greatest value from their therapies based on available data. BioMarin has taken steps to achieve this through development of a companion diagnostic (CDx) for Roctavian. The test is the first CDx immunoassay to be approved by the FDA alongside a gene therapy and can help identify which patients may be best served by the therapy. It is likely that this is a sign of things to come as manufacturers recognize the benefits afforded by taking a more personalized approach to gene therapy development. Furthermore, they will need to clearly demonstrate HEOR benefits in the context of durability and safety. These efforts sector-wide should help lower investment risk and generate commercial success.
In 2024, the sector will not return to the level of growth and investment seen during the pandemic, but the start of a wider market revival is entirely possible. The sector remains highly dynamic, and there are many transformative events on the horizon. As companies work to refocus and more clearly demonstrate value, the broader ecosystem will also continue to mature and evolve in parallel.
At the 2024 Cell & Gene Therapy State of the Industry Briefing, Tim Hunt, CEO of the Alliance for Regenerative Medicine echoed this sentiment and provided a positive outlook on what is to come for the gene therapy sector — an outlook that seems to be increasingly shared by the industry as a whole:
“This has been a long journey for many decades, and we’ve hit some bumps in the road. Gene therapies can be expensive, capital markets have not been where we wanted them to be, there have been safety issues, and so on,” Hunt said. “But in reality, the field is just maturing. It’s achieving a new normal. Breakthroughs are becoming the norm, these products are unlocking enormous value for both patients and society, and the US healthcare system is modernizing.”1
A large part of this maturation process simply involves generating more data, and with additional data comes increased confidence from investors, payers, providers, and patients. This increased confidence translates to more breathing room and resources for gene therapies down to the program level. The fact is, sometimes these things just take time.
Sources
1) ARM, 2024 State of The Industry Briefing
2) J.P.Morgan, 2023 Annual Biopharma Licensing and Venture Report
3) Biopharma Dive, “Newly optimistic, biotech investors weigh lessons of sector’s downturn”
4) Evaluate, “Uniqure’s accelerated approval hopes take a hit”
5) Pharmaprojects
6) Genetic Engineering and Biotechnology News, State of Cell and Gene Therapy 2024
7) LEK, “Looking Ahead in Biopharma: 2024”
8) EvaluatePharma
9) Biopharma Dive, “Bluebird, winding down in Europe, withdraws another rare disease gene therapy”
10) Institute for Clinical and Economic Review (ICER)
11) Fierce Pharma, “JPM24: Bluebird CEO points to 'very innovative contract' to defend Lyfgenia's pricing premium over CRISPR rival”
12) Fierce Pharma, “Bluebird’s sickle cell gene therapy comes with safety warning and higher price. Can Lyfgenia overcome CRISPR’s halo?”
13) Bluebird bio, Investor Presentation
14) Bluebird bio, Press Release
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Authors
Tom Fitzsimons is a Senior Analyst and member of Health Advances’ Cell and Gene Therapy Practice
Ned Wydysh, PhD is a Vice President and co-leader of Health Advances’ Oncology and Cell and Gene Therapy Practices
Vivek Mittal, PhD is a Partner, Managing Director, and co-leader of Health Advances’ Oncology and Cell and Gene Therapy Practices