The gene therapy boom continued this morning with yet another acquisition.
Contract drug manufacturer Catalent (NYSE: CTLT), of Somerset, NJ, has agreed to buy Paragon Bioservices for $1.2 billion, grabbing hold of a privately held developer of the viral “vectors” that gene therapy companies use to deliver their treatments.
In a gene therapy procedure, these vectors—engineered viruses—are filled with genetic blueprints and infused into a patient’s body. Those viruses then deliver their instructions, which tell the body to produce a protein that it is lacking due to a particular genetic disease. The hope is gene therapies provide a last-lasting, if not permanent effect through a single infusion. But it’s unclear how long any given treatment will last and, ultimately, what their commercial prospects will be. So far, they’ve struggled commercially.
Still, biopharma companies are betting on gene therapy’s future. The field just saw its first U.S. approval in 2018—for Luxturna, a treatment for inherited vision loss from Spark Therapeutics (NASDAQ: ONCE). A second, Zolgensma, a Novartis (NYSE: NVS) gene therapy for spinal muscular atrophy, could be approved next month. Others for hemophilia, beta-thalassemia, Duchenne muscular dystrophy, and more are in human testing. The FDA is ramping up plans to accommodate the surge in expected approval filings for gene therapies.
Biopharma companies have been paying up big for gene therapy assets of late. Roche, Biogen (NASDAQ: BIIB), Pfizer (NYSE: PFE), Johnson & Johnson (NYSE: JNJ), and others have each cut deals since January to acquire experimental or marketed gene therapies.
A few of those deals have centered on manufacturing expertise, which is critical for companies looking to succeed in the gene therapy sector. Roche, for instance, paid $4.8 billion for Spark, a gene therapy pioneer that boasted its own in-house gene therapy manufacturing capabilities. AveXis, which Novartis bought for $8.7 billion in 2018, also had such capabilities.
Now contract manufacturers and service providers are consolidating those assets. Thermo Fisher Scientific (NYSE: TMO), a developer of lab equipment, paid $1.7 billion for viral vector producer Brammer Bio in late March. Catalent is making a similar play with Paragon. It believes the addressable market for gene therapy tools is worth $40 billion, and Paragon is its way in. That market “is expected to have sustained growth of 25 percent in the medium term” and Paragon should outpace that growth “for the foreseeable future,” Catalent said in a statement.
Baltimore-based Paragon helps companies make adeno-associated viruses—a commonly used gene therapy vector—next-generation vaccines, CAR-T cell therapies, and more. The company expects to generate more than $200 million in revenue in 2019.
The cash deal should close in the second quarter.