Bayer spends up to $4bn in gene therapy push
German group acquires US-based AskBio to strengthen its lucrative pharma business
Bayer is spending up to $4bn for US-based gene therapy pioneer Asklepios BioPharmaceutical as the German group pushes into a fast-growing medical technique in its biggest pharma deal since 2006.
The AskBio transaction, which was announced on Monday morning, marks Bayer’s entry into gene therapy, a novel therapeutic approach that aims to treat or prevent diseases using genes rather than traditional drugs.
“It is one of the most exciting areas of science as we speak,” Stefan Oelrich, the head of Bayer's pharma division, told the Financial Times, adding that the German drugmaker is aiming for “a leading position” in that field.
According to an AskBio presentation, the overall market for cell and gene therapy stood at $4.8bn in 2019 but will grow tenfold to $44.5bn by 2024.
Large pharmaceutical companies have been attracted to gene therapies because of the transformative impact they can have on patients and the high prices the treatments can fetch.
Novartis bought Axevis for $8.7bn in 2018, for its Zolgensma gene replacement therapy for patients suffering from spinal muscular atrophy, which became the most expensive drug on the market at $2.1m. Last year, Roche spent $4.8bn on Spark Therapeutics, which makes a one-time therapy for inherited retinal eye disease priced at $850,000 in the US.
Bayer is under pressure to keep its pharmaceutical business running, which in 2019 generated 41 per cent of the group's revenue but 52 per cent of its operating profit. But over the coming years two of divisions bestselling drugs — the anti-clotting medication Xarelto and the eye medicine Eylea — will lose their patent protection.
At the same time, Bayer is still reeling form the repercussions of its ill-fated 2016 acquisition of US seed maker Monsanto for $63bn, which exposed Bayer to a wave of lawsuits over the potential carcinogenic effects of Monsanto's herbicide Roundup. Attempts to settle current and future claims in a $10.9bn settlement have hit a roadblock and this month Bayer issued a profit warning for its agricultural unit.
Shares in Bayer have lost 42 per cent this year and are grossly underperforming the wider German market, which is down just 6 per cent since January. Valued at €43bn, the Leverkusen-based conglomerate's market cap has more than halved since the Monsanto deal.
AskBio, which does not disclose revenue or profitability numbers, has already created successful gene therapies for rare diseases, including one for muscular dystrophy that it sold to Pfizer.
AskBio, which has more than 500 patents, is also trying to develop therapies for more common illnesses such as Parkinson’s disease and heart failure. While first clinical trials are currently only including a small number of patients, “we've seen some very promising early results”, AskBio's chief executive Sheila Mikhail told the FT.
Gene therapies have often been approved relatively quickly on data from small trials by regulators because they are targeted at serious conditions where the patients have few options. But a FDA decision this summer to ask for more data from BioMarin to support an approval of its gene therapy for haemophilia, a blood disorder, was viewed as a potential setback for the sector.
Mr Oelrich declined to answer if and when gene therapy-related revenue at Bayer could match those of blockbuster drugs like Xarelto or Eylea, which are currently in the billions. However, he stressed that the potential for Bayer was huge. “If you put all the rare diseases together, [you don't have] rare diseases any more [but] a big problem. And we have a technology that could potentially address all of them,” said Mr Oelrich. Should the technology be successful in addressing heart failure and Parkinson’s, “then you can really make an incredible impact on patients”, he said.
Bayer is going to pay half of the purchasing price up front in cash, with the remainder being contingent on AskBio meeting a number of undisclosed performance-targets over the coming years.