BioMarin Gambles $840M on Prosensa’s Duchenne Drug

Xconomy San Francisco — 

It wasn’t too long ago that Prosensa Holding was kicked to the curb by Wall Street investors. Following a failed Phase 3 trial for its Duchenne Muscular Dystrophy drug and a decision by GlaxoSmithKline to dump a partnership between the two companies, Prosensa lost around 90 percent of its total market value.

Since then, however, Prosensa has stayed the course, and kept pushing ahead with its DMD prospect, setting up a likely meeting with an FDA advisory panel next year. And while there’s no telling what will happen at that point, at least one company thinks Prosensa has a shot at success—San Rafael, CA-based BioMarin Pharmaceutical (NASDAQ: BMRN).

BioMarin agreed this morning to acquire Prosensa (NASDAQ: RNA), of Leiden, Netherlands, for $17.75 a share—a total of $680 million up front, and a roughly 60 percent premium to the company’s $11.77 per share closing price on Friday. The deal includes two additional approximately $80 million milestone payments tied to regulatory approvals of Prosensa’s Duchenne drug, drisapersen, in the U.S. and Europe. For Prosena’s shareholders to see that additional $160 million, the drug has to be approved in those regions by May 15, 2016 and Feb. 15, 2017, respectively.

BioMarin is on the hook to acquire $50 million in Prosensa equity should the deal fall through.

It’s a stunning turn of events for Prosensa, which appeared dead in the water just a year ago. Prosensa is one of a few companies developing treatments for Duchenne, a crippling, progressive muscle-wasting disorder that robs boys of their ability to walk and often ultimately kills them at a young age. Like Cambridge, MA-based Sarepta Therapeutics (NASDAQ: SRPT), Prosensa is advancing an RNA-based treatment that targets an abnormality in part of the dystrophin gene and is meant to help a subset of Duchenne patients “skip” over it (what’s known as exon-skipping). By doing so, the idea is that these Duchenne patients will produce more of the protein dystrophin—which they lack, and which helps their muscles work. Both the Prosensa and Sarepta drugs target abnormalities in exon 51, which affects 13 percent of patients with Duchenne. There are about 20,000 new cases of Duchenne worldwide each year.

Prosensa had a big partnership in place with GSK around drisapersen; the two ran a massive Phase 3 trial testing the drug in 186 patients (Sarepta, by comparison, until recently had been aiming to convince regulators to approve its Duchenne drug, eteplirsen, on an accelerated basis off of a small mid-stage trial). Prosensa went public in the middle of the study, priced at $13 per share, and shot up to $30 as investors awaited the results.

The news was bad, however. Drisapersen failed the study in September 2013; the drug didn’t improve Duchenne patients’ walking ability in a statistically significant way. Prosensa lost most of its value, and GSK bailed on the drug a few months later.

Since that time, however, Prosensa has picked up some momentum. It began assembling an FDA application for drisapersen, based on the idea that certain subsets of patients—namely, those treated at a younger age, before their disease progressed more—showed a much bigger benefit. It’s also been tested in far more patients than Sarepta’s drug—some 300 in seven clinical studies. In the meantime, Sarepta has had its own share of setbacks—it had been aiming for an FDA advisory panel next year, but the agency has required much more data from the company, pushing its timelines back significantly. With Sarepta now delayed, Prosensa at minimum has a shot to be the first to market in the U.S. with a Duchenne drug—something BioMarin CEO Jean-Jacques Bienaime mentioned specifically on a conference call with analysts this morning as a reason for the buyout.

“Our belief is that the totality of the Duchenne data com with the significant unmet need in this patient population provide support for regulatory approval,” Bienaime said the call.

That’s the gamble, of course. BioMarin will still attempt to win accelerated approval of drisapersen. The FDA is likely to hold an advisory panel on drisapersen that it would potentially look to before it makes a regulatory decision. And BioMarin conceded in a presentation that it would have to “explain the results of the Phase 3 clinical trial” to the FDA. RBC Capital Markets analyst Michael Yee noted that it “wouldn’t be a surprise” if the drug is rejected initially. But Bienaime pointed out a few things. First, South Plainfield, NJ-based PTC Therapeutics (NASDAQ: PTCT) won conditional approval of a different Duchenne drug, atalren, in Europe, despite a failed Phase 3 trial. Second, Prosensa has accumulated more data than anyone else with a Duchenne drug. And lastly, even if approval is delayed, the buyout could still lead to “significant value creation” for BioMarin.

All in all, there’s likely a feisty advisory panel coming next year.

“We’re going to work really hard to both explain why we believe the evidence supports the conclusion that it’s reasonably likely that drisapersen offers a benefit,” said BioMarin chief medical officer Henry Fuchs, on the call. “But we’ll also be very candid and transparent about the limitations of the evidence so that the advisory committee can be in a good position to give the FDA the information it needs to make a decision.”

Sarepta, meanwhile, surged 10 percent this morning on news of the buyout.