Source: BioMarin.
BioMarin (BMRN -1.60%) has inked a deal to buy Prosensa (NASDAQ: RNA) less than a year after GlaxoSmithKline (GSK 1.22%) abandoned its partnership agreement with Prosensa over worries that the FDA would fail to approve the company's Duchene's Muscular Dystrophy, or DMD, treatment.
BioMarin's decision to add Prosensa's DMD treatment to its fast-growing product line-up of drugs used to treat rare diseases sets up a potential future battle for market share with Sarepta (SRPT -0.80%), another small biotech stock developing its own promising DMD drug, eteplirsen. Let's take a closer look.
Small, but important market
In buying Prosensa, BioMarin gets its hands on drisapersen, a drug for DMD that was developed by Prosensa and GlaxoSmithKline.
That drug showed strong results in helping DMD patients gain additional mobility in early trials; however, late-stage performance was lackluster enough that GlaxoSmithKline walked away from its deal with Prosensa earlier this year.
However, not long after GlaxoSmithKline threw in the towel on drisapersen, prompting by patients with few other treatment options encouraged the FDA to reopen the door to approval.
The FDA's willingness to reconsider drisapersen is very good news for patients. DMD, a muscle wasting disease caused by the absence of dystrophin, a protein necessary for muscle function, is one of the most common fatal genetic disorders, and there currently aren't any approved treatments.
Source: BioMarin.
Behind the deal
BioMarin is paying $840 million to buy Prosensa in a deal that includes an upfront payment of $680 million, or $17.75 per share, and two smaller $80 million payments if Prosensa wins approval of drisapersen in the U.S. no later than May 15, 2016 and in Europe no later than Feb. 15, 2017.
BioMarin is arguably one of the world's most efficient developers of drugs used to treat rare disease. Its products include Naglazyme, one of the planet's most expensive drugs. Despite treating mucopolysaccharidosis VI, or MPS VI, a disease affecting just 1,100 people, Naglazyme's $365,000 price tag resulted in sales of $246 million through the first nine months of this year, up 21.5% from 2013. In addition to Naglazyme, BioMarin also markets the rare disease drugs Vimizim, Kuvan, and Aldruazyme.
With BioMarin's sales tracking at an annualized $707 million run rate exiting the third quarter, the company already appears well on its way toward its target of $1 billion in annual sales. However, the deal to acquire Prosensa suggests that if drisapersen gets the regulatory green light, BioMarin's peak sales could be well north of that level. Importantly, if drisapersen wins the FDA go-ahead, BioMarin believes the acquisition of Prosensa could prove accretive to its earnings by 2017.
Getting traction
It remains to be seen whether it's Prosensa or Sarepta's eteplirsen that wins over regulators and captures the bulk of sales within DMD.
Both drugs attempt to restore dystrophin production by skipping exon-51, and since that gene mutation affects about 13% of the 20,000 new cases of DMD diagnosed worldwide every year, it remains to be seen whether the market is big enough to support two players.
Both drugs put up encouraging results during clinical trials, but neither drug seems to have a definitive edge (yet). In mid-stage trials, drisapersen patients receiving the drug for 25 weeks were able to walk 35.1 meters farther during a six minute walking test than patients taking a placebo. At week 49, drisapersen patients could walk an additional 35.9 meters versus placebo. However, a larger phase 3 study in 186 boys failed to deliver results better than placebo.
Sarepta's eteplirsen also improved walking distance during its phase 2b trial, in which eteplirsen patients saw a 65 meter walking improvement when taking eteplirsen for 120 weeks. However, while the appearance of clinical benefit over a long period of time is encouraging, eteplirsen's trial was small, with only 12 children studied, and walking test results can vary widely.
And another thing
BioMarin's acquisition was intended first and foremost to get its hands on drisapersen, but drisapersen isn't the only drug Prosensa is developing. The company is also using its RNA technology platform to develop additional medicine that targets an additional 35,000 DMD patients. That suggests the market opportunity to BioMarin could be far larger than the initial limited market for drisaspersen. Whether or not drisapersen can differentiate itself enough from Sarepta's eteplirsen and win the majority of market share remains uncertain, but given that BioMarin has proven itself in rare disease development and marketing, investors may want to consider owning it in their portfolios.
