What happened
Shares of the commercial-stage gene therapy company Orchard Therapeutics (ORTX +0.00%) were up by a noteworthy 98% on sky-high volume as of 10:13 a.m. ET Thursday morning. The biotech's stock is rocketing higher on the news that the Japanese biopharma Kyowa Kirin (OTC: KYKO.F) has agreed to buy the small-cap gene therapy specialist for $16.00 per American depositary share (ADS) in cash.
Orchard Therapeutics shareholders are also in line to potentially book an additional $1.00 per ADS if its lead candidate, OTL-200, secures a U.S. regulatory approval as a treatment for early onset metachromatic leukodystrophy, an uncommon, inherited metabolic disorder.
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The deal represents a total maximum equity value of roughly $477.6 million, which equates to a possible premium of approximately 110% relative to the biotech's closing price on Wednesday. The biotech's lead therapy is currently under review by the Food and Drug Administration (FDA). The agency's decision is expected by March 18, 2024. OTL-200 is already on the market in Europe, where it is sold under the brand name Libmeldy.
So what
Apart from Kyowa Kirin adding an intriguing new platform to its portfolio, this deal is significant because it could be the start of a run on undervalued genomic medicine companies. Most of these next-generation biotech companies have lost a sizable chunk of their value over the prior two years due to investors moving out of speculative therapeutic platforms in response to rising interest rates.
NASDAQ: ORTX
Key Data Points
The net result is that there could be some tremendous bargains for asset-hungry biopharmas in this space. Orchard Therapeutics, for example, had lost nearly 95% of its value prior to today's buyout news, which unfortunately, isn't altogether uncommon in the gene therapy, gene-editing, and synthetic biology realms right now. Put simply, similar deals could become a theme soon -- especially with high-interest rates expected to linger for the foreseeable future.
Now what
While the possibility of a takeover is never a solid reason to buy a biotech stock, the challenging market conditions may have created a situation where cash-rich suitors may be more willing than usual to take on an elevated level of risk through the purchase of some of these commercially unvalidated platforms. Orchard Therapeutics, after all, could prove to be a downright bargain at this price point, depending on how its broader portfolio pans out.
