Novel Financing For Gene Therapy Company

By Cathy Yarbrough, Contributing Editor

Gene therapy pioneer Katherine High, M.D., was looking forward to her first meeting in 2011 with Jeffrey Marrazzo, then a consultant to the CEO of Childrens Hospital of Philadelphia (CHOP). A veteran of three life sciences companies, Marrazzo was meeting with Dr. High and other CHOP leaders to identify potential new revenue streams for the hospital.

Dr. High, an international leader in gene therapy research and clinical application, had considered postponing the meeting because she was so busy with her work as director of the hospitals Center for Cellular and Molecular Therapeutics (CCMT). However, she did not reschedule because she wanted to ask Marrazzo for a favor: Could he speak with the VCs who were calling her and inquiring about investing in CCMTs work on RPE65?

I hadnt spoken to them yet, because at the time I was busier than usual with my patient care, research, and teaching responsibilities. In addition, VCs are not a constituency that I normally deal with, said Dr. High, professor of pediatrics at the University of Pennsylvania as well as a Howard Hughes medical investigator.

Scheduled to last just 60 minutes, Dr. Highs first meeting with Marrazzo stretched to seven hours and was followed by many more meetings to determine the best approach for advancing CCMTs gene therapy discoveries. The result was a commitment of $50 million from CHOP to fund a new biotech company, Spark Therapeutics, to design, evaluate, and commercialize gene therapies for disorders that can lead to blindness, hemophilia, and neurodegenerative diseases. The company, like the hospital, is headquartered in Philadelphia.

CHOPs serving as the sole equity investor in Spark is definitely a novel financing model for early corporate activities to develop novel therapeutics, said Marrazzo, now president, CEO, and cofounder of Spark. Every situation is unique, and the situation should dictate the model.

Sparks situation was unusual because long before the companys official launch in late 2013, many assets were already in place, said Marrazzo, who uncovered them during his seven-hour conversation with Dr. High. It was like peeling back the layers of an onion, with each layer representing another asset, he said.

The assets included two clinical trials, a Phase 3 trial to treat a rare form of hereditary blindness, and a Phase 1/2 trial targeting hemophilia B, as well as staff members with gene therapy expertise in regulatory affairs, clinical research, and the manufacture of clinical grade vectors to transport genetic material into targeted cells.

Assembled at the center were world experts in gene therapy, said Marrazzo. CHOP had been incubating a biotech company within its four walls.

GENE THERAPY ASSETS UNDERVALUED Before investing $50 million to launch and operate Spark Therapeutics, CHOP officials considered but ruled out a licensing deal with an existing biopharm company or a start-up with VC funding. While we did have licensing deals on the table, that route would not have recognized the value of the asset in part because of the broad retrenchment that had occurred in the industry after the tragic 1999 death of Jesse Gelsinger in a gene therapy clinical trial, said Dr. High. Gelsinger died while participating in a clinical trial conducted by a University of Pennsylvania lab not connected to CCMT or CHOP.

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Novel Financing For Gene Therapy Company