(NVS GNVC) It’s hard to believe gene therapy was once considered such a promising endeavor that the FTC imposed radical restrictions on a small Novartis acquisition in 1997. This Business Week article is from exactly thirteen years ago.
In March, 1996, Swiss drug giants Ciba-Geigy Ltd. and Sandoz Ltd. announced plans to merge, forming a $63 billion company with $30 billion in sales of drugs, herbicides, and much more. But it wasn't only these big products that drew the scrutiny of the Federal Trade Commission's trustbusters. In an unusual move, they focused on the burgeoning area of gene therapy--a field with no products, no sales, and a market that is a decade or more from taking off.
The FTC was worried that the new company, called Novartis, would have a monopoly on key elements of gene therapy technology. On Dec. 17, the agency directed Sandoz and Ciba-Geigy to license some two dozen gene therapy patents to Rhone-Poulenc Rorer Inc., their direct competitor in the emerging field.[After two mergers, Rhone-Poulenc eventually became part of Sanofi-aventis.]
DISTANT PAYOFF. The decision marks a change in direction for the FTC and its fellow trustbusters at the Justice Dept. In areas where the government expects a payoff--even a distant one--it has decided to reduce barriers to innovation and competition as early as possible. In the past, the FTC, which oversees mergers and acquisitions, has generally waited until industries became more established or technologies were much closer to market. Now, there are likely to be many opportunities for the FTC to act, as consolidation in high-tech industries continues.
The Novartis case marks the earliest intervention by the agency so far. The action is prompted by the FTC's belief that the market for gene therapy could reach $45 billion by 2010.[Oops—they were slightly off in that forecast.]"It's the most important case we've ever done," says Claudia R. Higgins, senior staff attorney at the FTC. If companies see a "patent-blockaded pathway," she says, they'll spend their research dollars elsewhere. The FTC hopes that by clearing that pathway it will speed the arrival of life-saving drugs--at reasonable prices.
Gene therapy is a method of treating disease by modifying the genes in a patient's cells. It can be done by injecting genetic material into the body, or by removing cells, correcting their genes, and putting them back. Diseases such as cancer, along with hereditary ills such as cystic fibrosis or Huntington's disease could be treated this way.
So far, there have been only a handful of clinical trials of gene therapy, and most of them have been disappointing. But in the past few years, scientists have been working on new techniques for delivering genes to cells and for controlling their functions inside the body, and many believe that the problems will be solved.
The patents in question in the Novartis case fall into four areas. The first two are fairly narrow: In one, Sandoz is required to share the licensing rights for a hemophilia gene. The other involves a gene for chemoresistance that could, when slipped into cancer patients' bone marrow cells, protect them from the ravages of chemotherapy. Under the FTC agreement, Ciba, its affiliate Chiron Corp., and Sandoz would be barred from obtaining an exclusive license for this gene.
BIG STAKES. In the remaining two areas, the FTC decision has wider implications. The agency has ruled that Sandoz-owned Genetic Therapy Inc. must license a broad patent that covers all products based on "ex-vivo" therapy, in which cells are removed from the body, genetically altered, and replaced. But Novartis' new CEO, Daniel Vasella, says he always intended to license the Genetic Therapy patent: "This is no change for me."
There is more at stake in the fourth area. Both Chiron and Genetic Therapy hold key patents for a promising technique for treating cancer and other ills: the use of herpes simplex virus to deliver a gene called TK, or thymidine kinase, to diseased cells. The TK gene alone has no effect on cells. But when a patient is then given a dose of the drug gancyclovir, any cells containing the TK gene are killed.
Doctors envision using the herpes-TK technology in bone-marrow transplants. The idea is to slip the TK gene into the transplanted cells. If they are rejected, doctors can administer a dose of gancyclovir and kill them off. Another scheme is to put the TK gene into cancer cells. Several companies, including Rhone-Poulenc Rorer, are already injecting the TK gene directly into brain tumors. The herpes-TK therapy "will be an important short-term market," says Edward M. Hurwitz, a biotechnology analyst at Robertson, Stephens & Co. in San Francisco.
LANDMARK? The FTC decision requires Chiron and Genetic Therapy to license the herpes-TK technology to Rhone-Poulenc Rorer. For Chiron to agree, Ciba had to sweeten the deal. "We thought we were giving up a substantial position," says Lewis T. Williams, senior vice-president for R&D at Chiron. He calls the herpes-TK technology "one of the first truly useful technologies in gene therapy." Chiron will now get the rights to Genetic Therapy's gene therapy patents and a $60 million payment.
The FTC believes its foray into gene therapy is a landmark decision, and Vasella agrees. "The ruling charts new ground," he says. "It inherently says that the FTC wants to somewhat control the field of innovation." But such forays are still untested. Vasella worries that too much competition in a field such as gene therapy can lead to a reduced return on investment. Companies won't want to spend the money on truly innovative drugs.
In the case of gene therapy, most experts believe Vasella's fears are unfounded. Novartis and Rhone-Poulenc Rorer remain the two powerhouses. And the technology is evolving rapidly, with new gene-delivery methods and other techniques offering opportunities for lucrative patents. "The field is leapfrogging itself," says Jude Samulski, director of the University of North Carolina's Gene Therapy Center. The Ciba-Sandoz case is an indication that the FTC will continue to have a hand in keeping the field vibrant.‹
I have accumulated a great many shares of GNVC over the years 2004-present.The 2003 article by Brough[Baylor?] sticks in my mind re hearing and balance loss, and gene therapy.
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