Big deal: Nightstar shines bright in $800m acquisition

There is often a lot of media buzz around a company going public and understandably so as it represents a significant milestone. Some initial public offerings are more successful than others and not always do the proceeds exceed the amount a company had collected in venture funding, but the capital may be of secondary interest to the board and essentially just serve as another funding round on the way to greater heights.
Nightstar Therapeutics, set up to commercialise therapies for rare inherited retinal conditions based on research by Robert MacLaren, professor at the Nuffield Laboratory of Ophthalmology at University of Oxford, raised an impressive $75m in proceeds when it floated on Nasdaq in September 2017.
The figure was down slightly from its initial target of $86m, and below its total venture funding of $95.5m but the listing was a stunningly quick turnaround for a gene therapy developer that had been formally incorporated only three years earlier – though it had been incubated internally by the university since 2009. That speed one of the motivating factors behind the company receiving the GUV award for Exit of the Year at last year’s GUV Summit.
Unsurprisingly perhaps, the initial public offering was only a stepping stone for Nightstar, which only a few weeks after its IPO picked up an additional licence, this time for a potential treatment for Stargardt disease, a currently untreatable condition that causes progressive vision loss and often blindness, from Oxford University Innovation (OUI), the institution’s tech transfer office.
Nightstar’s shares opened at $19.20 in 2017. They experienced a lot of fluctuation – at one point the price dropped as low as $9.59 – and before biotechnology firm Biogen published its offer yesterday shares closed at $15.16 on Friday.
So, Biogen’s offer to pay $25.50 in cash per share was a notable increase not only on the original opening price but also on the current stock valuation. It means the corporate will hand over approximately $800m to Nightstar and its investors once the deal closes by mid-year.
The deal remains subject to customary closing conditions, including the approval of Nightstar’s shareholders, though with a price tag this high and the ability to join a long-established biotech player – Biogen was founded in 1978 and has a market cap of $64.3bn – there is little doubt that the proposal will be accepted.
That it is specifically Biogen that is acquiring Nightstar is interesting in itself. Not only have two of its co-founders collected Nobel Prizes – Walter Gilbert received one in chemistry for his work in DNA sequencing in 1980 and Phillip Sharp was awarded one in medicine for his discovery of split genes in 1993 – a third co-founder, Kenneth Murray, was knighted for his discovery of hepatitis B antigens also in 1993.
More notable still is that Biogen is actually the result of academic research too. The company was co-founded by Charles Weissmann, the director of the Institute of Molecular Biology at University of Zurich; Heinz Schaller, a professor of microbiology at University of Heidelberg; Murray, a professor of molecular biology at University of Edinburgh; Gilbert, the American Cancer Society professor of molecular biology at Harvard University; and Sharp, a researcher in the Koch Institute for Integrative Cancer Research at Massachusetts Institute of Technology.
Biogen expects the addition of Nightstar’s assets to strengthen its own focus on ophthalmology. Nightstar’s lead candidate, NSR-REP1, is a treatment for a rare, degenerative inherited retinal disease called choroideremia, which causes blindness and for which no approved therapy currently exists. The condition primarily affects men and begins with poor night vision before progressively leading to the patient going completely blind.
Nightstar has undertaken a phase 1/2 trial for NSR-REP1 and results showed a potentially meaningful decline in visual acuity – and even improved acuity in some subjects. The treatment is currently being evaluated in a phase 3 Star trial that is expected to deliver results in the second half of 2020.
The spinout’s second drug candidate, NSR-RPGR, is aimed at retinitis pigmentosa that is also a rare inherited retinal disease primarily affecting men. The disease causes impaired vision by adolescence leading into early adulthood, and progresses to legal blindness by a patient’s 40s. The therapy is currently undergoing a phase 2/3 trial.
The aforementioned treatment for Stargardt disease remains a preclinical candidate for now, where it is joined by several other programs targeting other genetic forms of retinitis pigmentosa and Best vitelliform macular dystrophy, a genetic disorder that also leads to vision loss.
Nightstar’s backers have included life sciences investment trust Syncona, which helped launch the company in 2014 and was its largest external shareholder with a 39.9% stake just after the IPO, venture capital firm New Enterprise Associates and investment management company Wellington Management Company.
Nightstar’s acquisition slots right into a recent flurry of acquisitions of spinouts. Spark Therapeutics, a US-listed gene therapy developer originally spun out from Children’s Hospital of Philadelphia, agreed to a $4.3bn acquisition by pharmaceuticals firm Roche last month and rare disease medicine producer Sarepta Therapeutics offered $165m for an acquisition of Myonexus Therapeutics, a US-based gene therapy developer spun out of Nationwide Children’s Hospital, an affiliate of Ohio State University, this month.
While initial public offerings are few and far between for spinouts so far in 2019, that seemingly has not stopped big money from flowing back into the ecosystem. The news about Nightstar in particular may not be welcomed by the UK government however. Although Biogen has not mentioned whether it intends to maintain Nightstar’s UK base, the former already decided to list in the US over the UK in a blow to Westminster’s aim of turning the country into a hub for unicorns, and an acquisition by a US giant rather than guaranteeing Nightstar’s long-term survival on its own in Britain does not square well with government strategy of growing spinouts and startups into large corporates of their own. Still, the deal is good news for University of Oxford and further underlines the strength of its spinouts.