Pfizer Moving Into Gene Therapy Is A Welcome Move

Posted: December 17, 2014 at 8:41 am

In an interesting move, Pfizer ( PFE ) has struck a deal with Spark Therapeutics to establish a gene therapy platform. King's College Professor Michael Linden, who is an expert in gene therapy research, will lead the effort. Under the agreement, Pfizer will make an upfront payment of $20 million to Spark Therapeutics and $260 million in additional milestone-based payments. In return, Pfizer will handle late stage clinical trials, approval and commercialization of the product. Spark is currently investigating the efficacy of gene therapy forhemophilia B, and its program will enter early phase trials next year. Gene therapy has been under scientific research for over 2 decades, but viable therapies have yet to gain commercial acceptance due to safety and delivery-related issues. However, Pfizer's move and some other recent developments in the industry suggest that the therapy may be coming off age. There is another implication of this move. Even if successful, Pfizer is still a long way away from a commercialized gene-derived therapy. It is thus just a single step in its program to reverse its revenue decline in coming years. Other actions are possible, or even likely, including an outright acquisition of a substantially larger company, considering that most deals announced thus far are focused on early stage compounds.

Our price estimate for Pfizer stands at $35 , implying a premium of about 20% to the market price.

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Establishing a gene therapy platform is a welcome move, and points towards Pfizer's willingness to innovate and take risks. Gene therapy involves treating a disease through modification of defective or absent gene. Such modification can include replacing, altering or supplementing existing genetic material. The approach offers the potential to treat rare hereditary diseases and open new doors in curing cancer. Although it is too early to estimate the revenue potential of this industry, a successful launch can pave way for big pharmaceutical firms to revive their declining businesses provided they jump on the bandwagon at the right time. Although Spark's gene therapy platform initially will focus on treatment of hemophilia B, there exists the potential for developing similar therapies for the treatment of cancer. This is where Pfizer is showing special interest. Its oncology drug sales jumped 16% globally in Q3 2014, sustaining the growth rate observed in the second quarter and representing a growth acceleration compared to the first quarter. For the first nine months, the segment's revenue growth stood at roughly 13%. The figure is the highest among the company's primary business segments, with vaccine sales racing past that of oncology drugs only in the third quarter. We expect the company to continue to push for deals and possibly, acquisitions, that can strengthen its oncology pipeline.

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Pfizer Moving Into Gene Therapy Is A Welcome Move

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