MTS Health Partners, L.P. is publishing Part 2 of its second series of Strategic Advisory Analytics Reports “Gene Therapy – Near-term Revolution or Continued Evolution? – The Gene Therapy Ecosystem”. An abbreviated version of Part 2 can be found here. Please email Ravi Mehrotra at Mehrotra@mtspartners.com for a full version of the Report.

MTS’ Gene therapy index is now trading +60% YTD (compared to +18% for the DJIA and +31% for the BTK) and valuations for pure-play Gene Therapy companies are approaching all-time highs. This performance reflects fundamental progress in the space (e.g. the August approval of Novartis’ CAR-T product Kymriah, the first FDA approved Gene-modified cell therapy, and the September announcement of Alnylam’s successful pivotal trial for Patisiran, the first RNAi drug candidate likely to win FDA approval), as well as increased M&A and licensing/development deal activity (e.g. the landmark $11.9bn Gilead buyout of Gene-modified cell therapy company Kite Pharma, the largest M&A for a precommercial biotech in history, and this week’s Homology Medicines/Novartis deal for next generation Gene editing technology). Within the precommercial space, Gene Therapies are now the number #2 modality in clinical development (44% small molecule, 24% gene therapy and 11% mAbs).

Part 2 describes the Gene Therapy space in detail, highlighting the various technologies and unique sensitivities each approach faces in the near-term. In a continuation of Part 1, our central approach to demystifying the totality of the Gene Therapy space has been to assign each company to one of four approaches – (1) Gene transfer, (2) Gene disruption, (3) Gene-modified cell therapy and (4) Gene editing.

Our top take homes from Part 2 are:

1. 1. Each Gene Therapy approach faces a unique set of hurdles (Slide 16)
   2. Delivery and payload technologies are critical components of all Gene transfer therapeutics (Slide 26)
   3. Delivery technologies for Gene transfer are principally viral, but newer non-viral approaches may potentially offer advantages (Slide 28)
   4. Whilst there is a plethora of methods for delivering Gene disruption therapeutics, current technologies are still inadequate to target many tissues and organs (Slide 39)
   5. Gene disruption approaches employ one of three core technologies (Slide 35)
   6. With two newly approved Gene-modified cell therapies on the market, all eyes are now focused on the commercial viability of these costly therapies (Slide 45)
   7. Nowhere is manufacturing innovation needed more than in the production of Gene-modified cell therapies (Slide 43)
   8. While Gene editing may one day be the holy grail of Gene Therapy, there are many outstanding questions around the safety and ease of use of this new Gene Therapy approach (Slide 58)

Part 1 of the report provided (LINK TO PART 1) key valuation and performance data from MTS’ proprietary database of 145 global Gene Therapy companies and bucketed the sub-sector into 4 core approaches. A major take-away from that piece was Gene Therapy companies now represent 20% and 29% by number and market capitalization, respectively, of precommercial public biotech companies. In addition, the mean valuation of public Gene Therapy companies ($500mm) now significantly exceeds mAbs ($380mm) and small molecule ($290mm) companies. These are notable stats given that, by most objective measures, (approvals, commercial success, etc.) Gene Therapies are still a relatively unproven therapeutic class.

Part 3 (to be published in Q4’17/Q1’18) will provide key insights and potential actionables with goal of outlining a detailed roadmap of the coming era of Gene Therapy. Part 3 will include discussion on the following topics: (1) What do the approved Gene Therapies tell us about leveragability of technology and future approvals? (2) What are the possible solutions to the major hurdles in each Gene Therapy approach? (3) Is there a playbook to “Domain Dominate” Gene Therapy? (4) What are the new regulatory challenges for Gene Therapy? (5) How will Gene Therapy pricing evolve?

About MTS’ Drug Pricing Report

The first series of our Strategic Advisory Analytics reports on Drug Pricing can be accessed at http://www.mtspartners.com/investment-banking/news/

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