Vertex Expands Collaboration With CRISPR, Acquires Exonics

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) announced that the company is expanding its collaboration with CRISPR Therapeutics (NASDAQ:CRSP) for an exclusive licensing agreement to discover and develop gene editing therapies targeting Duchenne muscular dystrophy (“DMD”) and Myotonic dystrophy type 1 (DM1).

Per the expanded collaboration terms, Vertex will pay CRISPR $1 billion, including $175 million in upfront payment and potential research, development, regulatory, and commercial milestone payments for the DMD and DM1 programs. Vertex will get exclusive worldwide rights to CRISPR Therapeutics’ existing and future intellectual property including foundational CRISPR/Cas9 technology.

Moreover, Vertex will be responsible for all research, development, manufacturing, and commercialization activities and all related costs related to the programs. However, research costs for a specified guide RNA research related to DM1 program will be shared by both the companies.

We remind investors that Vertex and CRISPR signed a four-year research collaboration back to October 2015. Per this agreement, Vertex and CRISPR are developing gene editing therapies for cystic fibrosis and sickle cell disease. In December last year, the companies selected gene therapy, CTX001, to move into clinical development for sickle cell disease and beta thalassemia.

Vertex also said it will acquire privately-held Exonics Therapeutics, which is focused on developing gene editing therapies for DMD and other severe genetic neuromuscular diseases. With the acquisition of Exonics, Vertex will gain intellectual property, technology, and scientific expertise in transformative gene editing therapies.

Vertex will pay $245 million upfront to Exonics for acquiring all its outstanding shares and form a wholly-owned subsidiary. Shareholders of Exonics are eligible to receive approximately $1 billion including upfront and potential milestone payments related to the DMD and DM1 programs.

Both the transactions are expected to close in the third quarter of 2019.

Vertex’s shares have increased 1.3% this year so far compared with the industry’s increase of 0.9%.

The company has a dominant position in the cystic fibrosis market with three marketed drugs — Kalydeco, Orkambi and Symdeko — for the indication. In the first quarter, these drugs raked in $857 million in sales, up almost 35% year over year. Last month, the company announced that it will submit regulatory applications seeking approval for its triple combination regimen for cystic fibrosis. A potential approval will help the company to target a larger patient population than its currently marketed drugs.

However, Vertex is significantly dependent on its cystic fibrosis franchise for future growth. The expanded collaboration with CRISPR and acquisition of Exonics are likely to lead to risk diversification for Vertex in terms of expansion of pipeline into new disease areas. Moreover, genomic editing using CRISPR technology to repair defective genetic material that causes diseases is probably one of the most promising and exciting healthcare innovations seen in decades. Successful development of gene editing therapies will be beneficial for the company.

Please note that Sarepta Therapeutics’s (NASDAQ:SRPT) Exondys 51 holds major share in the DMD segment. Sarepta is also developing other candidates, including gene therapies, for DMD. Several other companies are also developing therapies for DMD including Catabasis Pharmaceuticals (NASDAQ:CATB) . Vertex will likely face tough competition.

Vertex Pharmaceuticals Incorporated Price

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Zacks Rank

Vertex currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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