In October, Spark Therapeutics (NASDAQ:ONCE) took another step closer to FDA approval for its vision-restoring drug, Luxturna. An approval for the gene-editing therapy early next year would be a big breakthrough for precision medicine. But based on recent comments by Spark Therapeutics' management, it appears that this breakthrough would come with a shockingly high sticker price.
What's the story?
Luxturna is a gene therapy to treat patients with vision loss from biallelic RPE65 mutation-associated retinal dystrophy. It's administered by subretinal injection, and in trials, it's been shown to restore vision in more than 90% of patients for up to three years.
Normal vision depends on a complex cycle that's dependent on the RPE65 protein. Because these patients lack that protein, their vision cycle is interrupted, and their sight is compromised. Patients typically suffer progressive vision loss, and virtually all eventually become totally blind.
Luxturna restores the vision cycle by supplying a functional copy of the RPE65 gene that can kick-start production of the missing protein.
Currently, there are no FDA-approved drugs to treat RPE65 mutation-associated retinal dystrophy, so if Luxturna gets a green light, it will mark a significant advance in this indication.
How to value vision
Developing complex gene therapies isn't cheap, and the addressable patient population for this drug is small -- only 1,000 to 3,000 people in the U.S. The combination of a high-cost development process, a small potential patient pool, and a thus-far entirely unmet need suggest that if Luxturna is approved, it will fetch premium pricing.
Spark Therapeutics' isn't committing to a specific price yet, but in its third-quarter earnings conference call, management said it's number-crunching has it thinking Luxturna could hit the market with a one-time price "in excess of $1 million per patient."
The company says it's basing that price on "reasonable assumptions" about the direct costs incurred over a lifetime of treating patients currently. Without treatment, retinal dystrophy patients often can't work and require caregivers. Those expenses add up. Spark Therapeutics' also pointed out that state courts often order payouts of $1 million or more by long-term disability policies for people who lose their vision.
A seven-figure price would make Luxturna one of the most expensive drugs in the world. However, it could be that Spark Therapeutics is using that $1 million figure as a starting point for the discussion, and that if Luxturna is approved, it will launch at a lower price that appears (by comparison) to be more of a bargain.
An FDA decision on Luxturna is expected on Jan. 12 and while there are no guarantees, the odds of an OK appear good. The FDA's cellular, tissue, and gene therapies advisory committee discussed the pros and cons in October, and voted 16-0 in favor of recommending its approval.
Investors interested in owning Spark Therapeutics shares because of Luxturna will have to make some assumptions regarding the drug's peak sales, but given the size of the market and the importance of vision, it has blockbuster potential. Investors should also bear in mind that Spark Therapeutics is developing gene therapies for additional indications that could pan out someday. Furthermore, thanks to stock offerings, the company has $575 million in cash, so it's wallet is thick.
Overall, this is an intriguing company that ought to be on growth investors' radar.