KW-6356

Kyowa Kirin has agreed to pay an initial $16 a share for Orchard Therapeutics. Kyowa Kirin has addressed calls to strengthen its late-phase pipeline by inking a deal to buy Orchard Therapeutics for $387.4 million upfront. The takeover will give Kyowa control of a gene therapy that is on track to win approval in the U.S. in March. Orchard, like many gene therapy stocks, has had a torrid time on public markets, seeing its share price plummet more than 95% since its IPO in 2018. The biotech has reclaimed a small slice of the lost ground in recent weeks with the news that the FDA has accepted an approval application for review, sending its stock up, and has now been rewarded with an acquisition at a valuation it last commanded in 2021. The takeover will give Kyowa ownership of OTL-200, an early-onset metachromatic leukodystrophy gene therapy that is under review at the FDA. The therapy is already sold in Europe as Libmeldy and generated $6.6 million in the second quarter. Kyowa thinks it can maximize the value of Libmeldy while accelerating development of a pipeline that features gene therapies against rare diseases, namely mucopolysaccharidosis type I and type IIIA, as well as more common conditions including frontotemporal dementia and a form of Crohn’s disease. The assets will bolster a pipeline that has taken big hits over the past 18 months. When Kyowa sketched out its strategy in 2021, it built (PDF) its vision for the second half of the decade around three next-generation candidates. Kyowa stopped work on one of the candidates, the Parkinson’s prospect KW-6356, in July 2022 (PDF). Months later, the drugmaker and its partner MEI Pharma pulled the plug on development of another of the assets, cancer therapy zandelisib, outside of Japan. The discontinuations left a hole in Kyowa’s strategy, but it kept its midterm targets, leading an analyst on an August conference call to question (PDF) whether the biotech planned to plug the gap by acquiring late-stage assets. In response, Kyowa CEO Masashi Miyamoto, Ph.D., said the company had “a considerable amount of cash” and was working “proactively to acquire external assets.” Kyowa has agreed to pay an initial $16 per share for Orchard. Investors in the gene therapy specialist stand to pocket an additional $1 a share if the FDA approves the candidate that is now under review. The FDA is set to make a decision by March 18, with approval expected to add $90.2 million to the value of the deal. Even at $16 a share, the acquisition represents a big premium. Orchard has traded around $5 for most of the year, although the recent surge raised the share price to $8. Investors sent the stock up to $16 after news of the Kyowa buyout broke.