8 gene-therapy upstarts that could be M&A targets as biotech veterans like Bluebird face safety questions

Gene Editing UCSF
Brian Madeux, 44, looks up at nurse practitioner Jacqueline Madde while receiving the first human gene editing therapy at the UCSF Benioff Children's Hospital. Madeux, who has a metabolic disease called Hunter syndrome, will receive billions of copies of a corrective gene. Eric Risberg/AP
  • Gene therapies, in which healthy genes are inserted into a person's system, are a booming biotech investment area.
  • Audentes, Bluebird bio, Sarepta, and UniQure have all run into potential safety issues in the last year.
  • That could spur a wave of dealmaking focused on making gene therapies safer and easier to deliver, analysts say. 

Reports of patients deaths, cancer cases, and other potential safety issues in the gene therapy field have made some investors skittish and could create a ripple effect across the multi-billion-dollar field

Gene therapies are a relatively new and complex type of treatment for genetic diseases. They work by inserting a normal, functioning gene into the bone marrow, the liver or another part of the body to take over for an abnormal gene. While hundreds of gene therapies are being developed, only four have been approved in the US. 

One of the more advanced candidates ran into trouble last month when two participants in a biotech's gene therapy trial for the blood disorder sickle cell disease developed forms of cancer. Cambridge, Massachusetts-based bluebird bio disclosed that one clinical trial participant was diagnosed with acute myeloid leukemia and another developed myelodysplastic syndrome, a type of cancer affecting bone marrow cells. Sickle cell patients are more likely to develop myelodysplastic syndrome, but there is a concern that bluebird's treatment played a role in these cases. 

The biotech temporarily suspended its clinical trial and has stopped marketing the drug abroad, leading its stock to drop close to 40% on Feb. 16. 

In an update on March 10, CEO Nick Leschly said that testing had showed the drug likely wasn't behind the leukemia case, putting the issue to bed. But the case of myelodysplastic syndrome was still under investigation. 

Bluebird isn't the only gene therapy player to have reported potential safety issues in the last several months. The FDA halted trials of UniQure's lead drug for the blood disorder hemophilia B in December after a participant developed liver cancer. Audentes Therapeutics has reported three deaths while testing its treatment for a rare neuromuscular disease. Sarepta Therapeutics and Lysogene reported in October that a participant involved in their test of their Sanfilippo syndrome type A therapy died. 

At this point, most of these companies are still trying to pinpoint what caused the problems. There are a few components of these drugs that have caused concern. Some gene therapy recipients must receive chemotherapy beforehand to create space in the bone marrow for the new gene — a process that Leschly said in March that Bluebird would like to make less toxic.

Other forms of gene therapies are delivered deep into the body using a de-risked virus that can only carry small amounts of the treatment, sometimes leading companies to use larger doses that could have unintended side effects. 

To fix this, gene therapy companies are working to improve the process of using chemotherapy to prep the bone marrow for treatment, called myeloablative conditioning, or find ways to enhance or even bypass the use of viruses altogether. Some are even developing new controls for increasing, decreasing or turning off the treatments after they're inserted into the body. 

The safety questions surrounding leading gene therapy candidates may spur a new wave of dealmaking involving these new tools.  

"This probably accelerates the need to look for alternative solutions on delivery," Morgan Stanley analyst Matthew Harrison told Insider. "It will force a lot of people across the industry to re-evaluate their plans in terms of how to dose with less aggressive or no chemo-based pre-treatments." 

Insider spoke to four analysts to find out which startups could help the current leaders in gene therapy create better and safer products, or even move to the front of the pack themselves.

Here are the biotechs could be takeover targets for gene-therapy frontrunners, listed alphabetically.

This article was published on February 26. It was updated on March 10 with comments from Bluebird's CEO.

AvroBio

Chemotherapy
Chemotherapy drugs are administered to a patient at a hospital in Chapel Hill, N.C. Gerry Broome/AP

AvroBio, like bluebird bio, uses a type of de-risked virus called a lentiviral vector to deliver a healthy gene. To make this possible, many companies use a chemotherapy agent called busulfan to create space in the bone marrow for these types of gene therapies. Busulfan can be harmful, and is tricky to use because people metabolize it at different rates, AvroBio's Chief Scientific Officer Chris Mason said in a blog post.

AvroBio has been investing heavily in better conditioning options, SVB Leerink analyst Mani Foroohar said.

The company's primary focus has been on a specialized version of busulfan called Bu90. This specific conditioning agent hits a midpoint between being too weak and therefore not making enough space for the gene therapy to plug in, or too strong, which can be toxic. The company has also invested in a better tool for monitoring patients during the conditioning process. 

AvroBio is currently testing three gene therapies in humans for rare conditions including Fabry disease and cystinosis.

Freeline Therapeutics

Hemophilia drugs
A worker at the Baxter Hyland Immuno Facility in Thousand Oaks, prepares to flash freeze bottles of a substance that will become a blood-clotting drug used by people with hemophilia. Mel Melcon/Los Angeles Times via Getty Images

One of the major concerns for gene therapies that use adeno-associated virus, or AAV, vectors to deliver healthy genes is the high doses levels used.

"In the past year, starting with Audentes, companies have been pushing their doses quite high, and we're seeing the effects," Wedbush analyst David Nierengarten said, referencing the three deaths in Audentes trial

British startup Freeline is currently developing four AAV gene therapies that may be able to hit their targets better and express more proteins, meaning they can be given at lower doses. 

The company's most advanced drug candidate is for hemophilia B, which causes uncontrolled bleeding because the body doesn't produce normal levels of a clotting protein called factor IX. The disease is a popular target in the young gene therapy industry, with UniQure and Spark Therapeutics both developing treatments. Freeline, however, has reported its drug leads to higher factor IX levels than its competitors.

Jasper Therapeutics

Jasper Therapeutics laboratory
A scientist uses a machine for high-throughput cell analysis at Jasper Therapeutics. Jasper Therapeutics

Redwood City, California-based Jasper Therapeutics' focus is on developing more effective and safer gene therapy conditioning agents.

Instead of chemotherapy, the company is using monoclonal antibodies that block a stem cell receptor called CD-117, killing off some stem cells and creating room for gene therapies to embed in the bone marrow. The conditioning agent may also make the bone marrow more receptive to new stem cells.

The approach has shown promise in early in-human tests. Jasper is now working with San Francisco startup Graphite Bio on a treatment for severe combined immunodeficiency, commonly known as bubble boy disease.

The treatment would combine Jasper's conditioning agent and Graphite's gene therapy. The companies have not yet stated when they plan to begin in-human testing. 

Magenta Therapeutics

Jason Gardner Magenta
Magenta Therapeutics cofounder and CEO Jason Gardner. Magenta Therapeutics

Cambridge, Massachusetts-based startup Magenta Therapeutics hopes to eliminate the need for chemotherapy pre-treatments by selectively eliminating stem cells using antibody drug conjugates.

Like Jasper's drug, Magenta's treatment also targets the CD-117 receptor to get rid of stem cells. A single dose of Magenta's drug was able to get rid of more than 90% of the targeted stem cells in preclinical testing, according to a company presentation. 

Magenta has signed gene therapy deals with AvroBio and Beam Therapeutics to use its conditioning strategy for lysomal and blood disorders. Magenta plans to launch a trial in humans later this year.

Poseida Therapeutics

Poseida Therapeutics
Poseida Therapeutics CEO Eric Ostertag, center, is pictured in the company's labs. Poseida Therapeutics

California-based Poseida Therapeutics plans to use some of its cell therapy tools to use to make a better gene therapy. 

Poseida's treatments are designed to be ferried to the liver by an AAV vector. The healthy gene is then inserted into the DNA strand by a tool called piggyBac. That tool is able to carry much larger genes than many other viral vectors, meaning the treatments could be given in lower, and likely safer, doses. Eventually, the company's goal is to move away from using AAV vector altogether, instead delivering the treatment into cells via a nanoparticle. 

The company's initial gene therapy candidates are for the liver condition ornithine transcardamylase deficiency and a metabolism disorder called methylmalonic acidemia. It has not disclosed when it plans to begin testing these drugs in humans. 

Precigen

Precigen Helen Sabzevari
Precigen CEO Helen Sabzevari. Precigen

Maryland-based Precigen is one of the more advanced gene therapy companies hoping to bypass viral vectors.

Its lead gene therapy candidate for heart failure is injected using a catheter into the coronary sinuses and the heart. Once there, three genes linked to heart failure are simultaneously expressed.

The company is currently running an early stage trial in humans. Early data indicated that half of the 10 trial participants saw improvements in their cardiac outcomes six months after receiving the treatment. Precigen plans to release additional clinical data later this year. 

 

Rocket Pharmaceuticals

dna crime lab
A laboratory employee in the DNA laboratory of the Bavarian State Criminal Police Office (LKA) prepares a DNA sample for molecular biological analysis. Sven Hoppe/Picture Alliance via Getty Images

Rocket Pharmaceuticals' lead gene therapy for a rare form of anemia uses a lentiviral vector, but it doesn't require bone marrow conditioning due to unique features of the disease. That drug candidate is currently being tested in humans in a Phase 2 trial. 

The biotech is also collaborating with others to assess pre-treatment conditioning options. Rocket has teamed up with Forty Seven, which was acquired by Gilead Sciences last March for $4.9 billion, and the Stanford University School of Medicine to assess pre-treatment conditioning options for two of its drug candidates.

CEO Joseph Schwartz said when the Forty Seven collaboration was announced in March 2020 that conditioning will be more integral for the company's other drug candidates, which could treat conditions like red blood cell disorder pyruvate kinase deficiency and the immune system disorder leukocyte adhesion deficiency.

Ziopharm Oncology

Heidi Hagen Ziopharm Oncology
Ziopharm Oncology interim CEO Heidi Hagen. Ziopharm Oncology

Boston-based Ziopharm is developing a gene therapy treatment for recurrent glioblastoma that lets doctors and patients better control how and when it's activated. 

With Ziopharm's treatment, the gene that produces an immune system-signaling protein called interleukin-12 or IL-12 is injected into a tumor. That gene is only activated when a patient takes a pill called veledimex. Expression of the gene can be increased, decreased, or turned off altogether.   

Early in-human data presented last year showed the treatment alone could extend median survival to 16.2 months, compared to 12 months without. Ziopharm is also testing the treatment in combination with other immuno-oncology drugs. 

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