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IPO Watch: Novartis Majority Held GenSight; Hit or Miss?


2015 has been pretty hot year for biotech IPOs. The space as a whole has expanded close to 400% over the past five years, drawing both speculative and long-term investor attention. A number of news media outlets are now reporting that we are coming to the end of what has now reached bubble status in biotech, and as such, we will likely see a flurry of small companies rush through IPO filings in order to draw benefit from the current bull market before it (potentially) collapses. When something like this happens, it means that we must be vastly more diligent in the IPOs we take part in, and try to separate the proverbial wheat from the chaff as far as gaining exposure is concerned. One company that falls into this upcoming IPO category is Paris based GenSight Biologics – a development stage biotech working on gene therapy treatments for rare retinal diseases. So, with this said, let’s take a look at GenSight in order to try and figure out which of the two sides of the fence it falls on – wheat or chaff.

First, let’s have a quick look at the company itself and its pipeline. The company’s primary focus is to combine its proprietary integrated development platform with a gene therapy-based approach, primarily targeted at preserving and restoring vision through intravitreal or subretinal injection. Intravitreal here means an injection directly into the eye, while subretinal (as you might expect) means an injection underneath the retina. The company’s pipeline currently comprises two primary candidates – GS010 and GS030 – with the former being lead and the latter secondary. GSO10 targets Leber hereditary optic neuropathy (“LHON”), which is a rare mitochondrial genetic disease that arises from a mutation in a gene called “ND4”, which leads to a number of missing key mitochondrial proteins in the eye. GS010 allows physicians to deliver the missing mitochondrial proteins into the mitochondrion, and (as hypothesized by GenSight) allows for a restoration of mitochondrial function. What makes this treatment particularly interesting is its rare disease status. Approximately one in 30,000 people suffer from LHON, or approximately 9000 people in the US. This puts it as a candidate for orphan drug designation by the FDA, something that – if received – could speed up and help to fund approval if GenSight can demonstrate efficacy in trials. A phase 1/2 has already completed, with safety and tolerability results positive, and the company plans to initiate a phase 3 trial during the latter half of this year.

The second primary treatment in the company’s pipeline is GS030. GS030 is currently targeted at the treatment of retinitis pigmentosa, which is an inherited, degenerative eye disease that can lead to night blindness and tunnel vision (as a result of the inhibition of peripheral vision). GS030 uses a “viral vector to introduce a DNA sequence that encodes a photosensitive proteins belonging to channelrhodposin (ChR) family, into the nucleus of the target cells.”

In short, it changes the nucleus of target cells to make them express a protein that makes them more sensitive to light. Once again, this treatment is a candidate for orphan designation, with retinitis pigmentosa affecting between 50,000 and 100,000 people in the United States (the cut-off for orphan drug designation as defined by a “rare disease level” is 200,000 people). The treatment is currently preclinical, but GenSight expects to initiate a GLP toxicity study during the second half of this year for the aforementioned incidence.

What are the details of the IPO? Well, GenSight is targeting between $100 million and $115 million for a US listing, with the majority of the funds slated to go towards the pushing forward of its GS010 phase 3 trials later this year. We saw a €35 million series A led by Novartis AG (NYSE:NVS) back in 2013, making the company GenSight’s largest shareholder with an approximate 20% stake. The IPO comes quick on the heels of the January IPO of Spark Therapeutics Inc. (NASDAQ:ONCE), another company targeting ocular therapy, which raised $161 million and is widely considered to be the most successful biotech IPO of the year.

So what’s the takeaway here? Well, as we’ve mentioned, with us approaching what could be the end of a long-term bull run in biotech we must be careful to which IPOs we expose ourselves. In this instance, however, GenSight could be a valid candidate for allocation. The company has two lead treatments targeting unmet medical needs with far less than 200,000 prevalence in the US, making both potential orphan drug designations, and this could hold it in good stead going forward if efficacy can be proven in trials.

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