If a once-modest regional hospital and its new biotech allies have their way, the capital of Ohio could one day rival America’s other biomedical hubs.
“Our goal is to make Columbus the center of the universe for gene therapy,” says Doug Ingram, CEO of Sarepta Therapeutics.
Sarepta (NASDAQ: SRPT) is based in Cambridge, MA, as you might expect from a high-flying biotech company. But it plans to open an 85,000 square-foot gene therapy center with 100 employees in Columbus, tapping into a wide-open pipeline from Nationwide Children’s Hospital. Earlier this year, Sarepta bought a startup that spun out of Nationwide to grab five experimental gene therapies developed at the hospital, adding to three others it had already acquired from Nationwide since 2017.
Sarepta isn’t Nationwide’s only new biotech friend. The hospital has signed 28 licensing deals since the start of 2018, a stunning amount for an entity that, two decades ago, had barely any in-house research of its own. Thanks to ambitious officials, a risk-taking administration, and a tight connection between its labs and its hospital practice, Nationwide has become a gene therapy leader. “They’ve been unbelievably productive,” Ingram says.
Nationwide really got started, in fact, when much of the field was shutting down after an infamous death during a gene therapy clinical trial. “It looked like it had no future, people were really frightened,” says Jerry Mendell, the longtime director of Nationwide’s gene therapy center and a pioneer in the field of neuromuscular disease research. “What we started here has had an incredible impact.”
The hospital’s appetite for risk and Mendell’s persistence could lead to one hell of a coming-out party. In clinical tests, the spinal muscular atrophy treatment Zolgensma, developed by Mendell’s team and already the centerpiece of an $8.7 billion buyout, has given infants with a probable death sentence a chance to live, grow, and thrive.
Zolgensma could soon become just the second gene therapy approved in the U.S. Its new corporate owner, Novartis (NYSE: NVS), has hinted that it could also become the most expensive drug of all time. If a single dose of Zolgensma turns into a cure, as is the hope for this and other gene therapies, it could upend the way doctors treat SMA. In short, it will be a crucial test case for the medical, social, and financial viability of gene therapy.
After flying under the radar all these years, Nationwide is now squarely on the national map.
Phil Johnson needed a star.
Johnson came to Nationwide in 1991 after a four-year stint running the National Institutes of Health’s infectious disease laboratory. Nationwide was a small-town hospital then. It paled in comparison to children’s hospitals in Seattle, Boston, Philadelphia, and nearby Cincinnati.
But Nationwide’s board had broader ambitions, a reflection of Columbus’s own historical ascent as a major U.S. city. Columbus has long been an industrial hub and a major academic presence because of The Ohio State University. (Yes, they insist on the “The.”) Between 1950 and 2000 as suburbs sprouted up around Columbus, it annexed more than 150 miles of nearby land and grew considerably, building a diverse economy that went beyond its industrial roots. Since the 1960s, its population has nearly doubled to almost 890,000, putting it 15th in the country, just behind San Francisco.
Johnson was hired and quickly began pushing hospital administrators to make Nationwide similarly known, well, nationwide for its research. “They saw that the way to take the hospital to the next level was to invest in research and academic medicine,” says Johnson, now the chief scientific officer of a stealthy Philadelphia gene therapy startup called Limelight Bio.
These were the early days of gene therapy, which uses viruses to shuttle genetic instructions into the body to fix a genetic disease. The first human tests had just begun. Johnson wanted to hire high-profile researchers and entice them with a focus, he told the board, on “genetic medicine,” a broad term that included what would come to be known as gene therapy. If they could invest in the work, the scientists would come, and Nationwide would no longer have to send Columbus kids elsewhere to get treated. “They could go back to the community and say, ‘look what we’re doing for you,’” Johnson says.
At the NIH, Johnson had been involved in early research using adeno-associated viruses (AAVs) as a way to deliver potential therapies into cells. He brought that interest to Nationwide.
But it was tough to make the amount of engineered virus needed for animal testing. The amount for testing in humans, if they ever got that far, would be even greater.
Johnson and his first hire Reed Clark, who had earned his PhD in molecular genetics from Ohio State, began working on ways to produce AAVs more efficiently and in greater batches. They convinced the board to back their efforts.
“The research budget started to climb year after year,” says Clark, who is now a senior VP of gene therapy at Ultragenyx (NASDAQ: RARE). “And that was really due to Phil’s persistence.”
Then the gene therapy field ran into tragedy.
In a now-infamous study, an 18-year-old Arizona teenager named Jesse Gelsinger died in a gene therapy trial at the University of Pennsylvania in 1999. The news sent shockwaves through the sector. The FDA suspended trials. Investment chilled. Startups crashed. And the work of a researcher named Jerry Mendell, the chair of neurology at Ohio State, ground to a halt.
“Basically all of gene therapy got shut down because of the death of this young man,” Mendell (pictured below) says.
A neurologist by training, Mendell for decades has treated kids with deadly neuromuscular diseases like Duchenne muscular dystrophy and spinal muscular atrophy. Until recently, they had no FDA-approved treatments and still don’t have cures. “He diagnoses them and sees them pass [away],” Clark says of Mendell. “It’s hard to articulate what that’s like. I’ve tried to wrap my brain around it.”
Mendell doesn’t just treat sick kids. He does lab work, too, and has devoted his life to muscular dystrophy research, including a quest for a gene therapy. In 1999, Mendell became the first to test a gene therapy for a neuromuscular disease—Limb-Girdle muscular dystrophy—in humans. It was “modestly successful,” he says, but in a post-Gelsinger world, the work couldn’t continue at Ohio State. “I tried to revive the program on campus and met considerable resistance,” he says.
Johnson and Mendell had been friends for years; both were Ohio State faculty. Mendell was the star that could put the hospital on the map, but Johnson wouldn’t raid a local university. He just planted seeds from time to time. “Jerry, let me know if you ever want to step down,” he’d say.
Mendell became frustrated with his lack of progress at Ohio State. He was intrigued by Nationwide’s gene therapy work, which had continued at the newly christened Center for Gene Therapy. Despite the Gelsinger tragedy, the administration was convinced to keep going.
Mendell credits Johnson for convincing the administration. Johnson downplays his influence. “Everyone was still on board,” he says. The reason: Nationwide was working with AAV, not the other virus, adenovirus, that killed Gelsinger. “If you understood the science and the circumstance I think it was explainable,” he says.
In 2003, Mendell and Johnson met for lunch. “I asked him a single question: What do you want to do with the rest of your career?” Johnson recalls. “He said, ‘I want to cure muscular dystrophy.’ And I said, OK, let’s do it.”
Mendell gave Johnson a list of the things he’d need to succeed. Johnson barely remembers what was on it. “It was not a negotiation,” he says. “It was just about getting Jerry.”
LIKE A STARTUP
Soon after Mendell came aboard, Johnson had a surprise. He was leaving Nationwide for the Children’s Hospital of Philadelphia, which had emerging gene therapy work of its own. He walked into Mendell’s office and said, “You’re the new director.”
“I didn’t come down here to be the director,” Mendell responded. “I came down to do research.”
But Mendell took the job and used it to align the center with his personal mission: to treat kids with neuromuscular diseases. He recruited Brian Kaspar, Louise Rodino-Klapac, Zarife Sahenk, and other PhDs with experience or interest in the role AAV could play in gene therapy.
The idea was for scientists to work closely with Nationwide’s clinicians, to move lab discoveries quickly towards human testing. Rodino-Klapac, for instance, began on Duchenne and Limb-Girdle gene therapies right when she arrived in 2005, working alongside Mendell, who sees muscular dystrophy patients at Nationwide. Mendell is currently the lead investigator for the experimental treatments Rodino-Klapac developed. That closeness “enables things to move faster,” she says.
Mendell schooled his crew on the ins and outs of early drug development, including medical oversight boards, regulation, and the packages of data needed to move a medicine into human trials. They ran experiments that failed. They learned, incorporated their findings, tried again, and did better, Rodino-Klapac says. What Clark calls an “early biotech startup” began to form with various capabilities one might find within a life sciences company. “We didn’t even realize it,” Clark says, “It grew organically.”
Mendell and Johnson recruited Kaspar in 2004 from the Salk Institute for Biological Studies in San Diego, where he had been doing work with AAV viruses. Mendell’s focus on close relationships between clinicians and scientists was important. “We clicked early on,” Kaspar says, “and I think we did some magical work together.”
That work started with manufacturing. Kaspar says it became clear early on that Nationwide had to make its own AAV viruses. Outside products cost too much and weren’t reliable. Mendell and Clark had to talk the hospital board into funding an in-house manufacturing facility.
Clark and Mendell pleaded their case for months, telling their story over and over again, detailing the costs and length of studies, the potential revenues from products, and the grant funding the hospital could attract. They finally got $2 million for a small facility that opened in 2009. From there, Nationwide “took off like a rocket,” Mendell says.
One evening in 2008, Kaspar was about to head home when there was a knock at his office door. It was his labmate, Kevin Foust, who would go on to become a neuroscience professor at Ohio State. “You’re never going to believe what I’m about to show you,” Foust said.
To that point, Kaspar had spent the bulk of his career trying to slip medicines through what’s known as the “blood-brain barrier,” a semipermeable lining of the blood vessels in the brain that is hard for drugs to penetrate. That night, it finally became possible.
Foust showed Kaspar microscope slides from mouse tissue indicating that a type of AAV virus, AAV9, could cross the barrier. They found it throughout the central nervous system, including the motor neurons in the spinal cord that control muscle function. They studied the slides for hours, in awe. The idea of using AAV9 to send a gene therapy into the brain and spinal cord became real. “What’s the first disease we target?” they asked one another, and they both came up with the same answer: SMA.
In SMA, a genetic mutation causes the lack of a key protein, SMN, which in turn leads to the death of motor neurons. The prognosis for Type 1 SMA, diagnosed in infants, is particularly grim. “Love them and prepare to say goodbye” is what clinicians would say to parents, Kaspar says.
Before the 2016 approval of the Biogen (NASDAQ: BIIB) drug nusinersen (Spinraza)—a chronic treatment that could change the trajectory of the disease—there wasn’t much clinicians could offer except palliative care. Could a gene therapy, with one dose, offer a long-lasting solution—or potentially a cure?
Their work on AAV9 crossing the blood-brain barrier was published in Nature Biotechnology in 2009. Kaspar went to work to find out if it could lead to a gene therapy. He used AAV9 to deliver SMN protein into mice engineered with an approximation, or “model,” of SMA. After one shot the mice started to survive for days, then weeks, months, and more than a year—much longer than they should have. He saw the same in monkeys. “That’s when we knew we’ve got to get this to patients,” Kaspar says.
But drug companies weren’t interested. There was “tremendous reluctance that this was real,” Kaspar says. So Kaspar teamed with biotech entrepreneur John Carbona in 2013 to form a company called AveXis, which licensed the therapy from Nationwide and raised at least $75 million in private capital to move it forward.
A major concern lay ahead, however. To succeed, AveXis had to inject infants with very high doses of AAV9 for the treatment to make a difference. Nationwide scientists had learned this through failure. Gene therapies delivered to isolated limbs or muscles weren’t going to “treat the core problem” of a neuromuscular disease, Rodino-Klapac says. To get enough of the medicine to all the key muscles affected—the heart, the diaphragm, and more—the gene therapy had to be given systemically at a high dose.
Mendell and Kaspar got calls from leaders in the field pleading with them to stop. “You’re going to kill someone,” Kaspar recalls being told. “This is going to be Jesse Gelsinger all over again.”
Mendell had to make the final call. It was he, after all, who had to do the procedure, who had to have the “iron clad stomach,” Kaspar says.
Many years later, Sarepta CEO Ingram asked Mendell why he picked such a high dose. “I’m sick of watching kids die, that’s why,” Mendell shot back, according to Ingram.
“Without that, we wouldn’t have saved lives and wouldn’t have had patients walking,” Mendell told Xconomy when asked about the risk.
The day of the first high-dose infusion came in 2014. Kaspar says that he made sure Mendell had a cup of coffee and a meal, patted him on the back, and watched him disappear into the hospital clinic. Kaspar and Carbona paced the rest of the day, waiting for updates. Finally, a call from Mendell: “Come meet the brave family and the real pioneer.”
Kaspar walked into the patient’s room. He saw the mother and her infant, fast asleep as if nothing had happened. They had made it through the first 12 hours and, with caution, breathed a sigh of relief.
THE MOST FRIGHTENING MOMENT
The scare didn’t come until weeks later. The infant’s liver enzymes spiked, which in some cases can mean inflammation or damage to the liver. Mendell calls it “the most frightening moment” he’s ever had in his decades of gene therapy work. “What was going through my mind was we could be faced with another serious complication,” he says.
It wasn’t, though. A spike in liver enzymes had cropped up in other gene therapy trials without disastrous results. Mendell called the FDA immediately, and instead of putting the study on ice or raising alarms, they agreed to change the trial design to give patients steroids before the gene therapy. The study continued without delay, and no serious side effects have emerged. As time went on, the babies started hitting milestones that, based on historical data, would likely never have happened: sitting up, rolling over, and in some cases, walking.
Says Kaspar: “I remember Jerry saying, ‘Brian, I’ve been at this many years, don’t get excited, things can go south. Just temper yourself.”
“It was great advice, but I was like, ‘Jerry, at least let me have an ounce of excitement here!’”
Things haven’t gone south yet. The results from that first trial were so striking they were published in the New England Journal of Medicine in November 2017. They led Novartis to buy AveXis for $8.7 billion. And if Zolgensma gets to market—the FDA is supposed to decide in May—Nationwide would receive from Novartis single to low double-digit royalties on sales of what could be the priciest drug ever. A Novartis executive last year speculated it would be reasonable to charge $4 million to $5 million for a one-time dose.
(The drug-price watchdog ICER took issue with that potential price tag, as Xconomy reported earlier this month.)
Perhaps more important than the royalty stream will be the know-how. The Zolgensma work “taught us that we could move to very large [doses],” Mendell says, and “that would make a difference in the clinic.”
They’ve recreated the playbook elsewhere.
Ed Kaye was Sarepta’s chief medical officer for four years from 2011 to 2015. He tried to license Zolgensma from Nationwide, to no avail. Nationwide also had two Duchenne gene therapy programs. Other academic centers had similar programs, but Kaye wasn’t interested.
“I knew Jerry would be first in the clinic and get it done quickly,” Kaye says. “In this business, it’s who gets there first that’s important.”
(There’s history between the entities. When Sarepta was known as AVI Biopharma and based in the Northwest, it began work on a Duchenne drug called eteplirsen (Exondys 51). Nationwide ran the key clinical test that led to a controversial FDA approval.)
After he became Sarepta CEO, Kaye struck a deal for both Nationwide Duchenne gene therapies. Under Ingram, Kaye’s successor, Sarepta bought Nationwide spinout Myonexus Therapeutics in 2019, which is based on Rodino-Klapac’s work, gaining gene therapies for different forms of Limb-Girdle muscular dystrophy.
Sarepta then licensed Nationwide investigator Zarife Sahenk’s program for a form of Charcot-Marie Tooth, a degenerative genetic nerve disease. Like Zolgensma, all of those programs use a very high dose of AAV to deliver a genetic fix.
All are now in human testing. None so far has caused serious safety problems. And Sarepta’s share price has hit an all-time high as the programs have advanced.
One reason Sarepta and Nationwide have become so intertwined, Ingram says, is that Mendell, who worked with Sarepta on eteplirsen, vouched for the company when offers started coming in for the Limb-Girdle programs. “There was a lot of competition,” Ingram says. “Mendell stepped in and said don’t partner with the wrong company for your life’s work, give this to people who actually know what they’re doing, and thankfully it was us.”
“We dealt with other universities where that’s not the case,” Ingram added.
Speed is also a differentiator, according to another deal partner. “I have never seen an [academic] organization move as fast and with such high quality of science, medicine, and manufacturing as Nationwide,” says Amicus CEO John Crowley, whose firm paid $100 million last year to buy Celenex, another Nationwide spinout, with 10 programs for rare disorders that Kaspar and colleague Kathrin Meyer had started.
The hospital currently has five gene therapies in human trials and has filed a total of 18 applications for the FDA’s green light to start clinical testing. Abeona Therapeutics(NASDAQ: ABEO), Milo Biotechnology, and just last week, Audentes Therapeutics(NASDAQ: BOLD) have also licensed Nationwide programs.
The hospital did three licensing deals in 2012 when Matt McFarland, VP of technology commercialization, was first hired. In 2018 the number climbed to 19. Nationwide inked nine more—five for gene therapies—in the first quarter of 2019, bringing in $28.5 million in revenue, which could put it on track for its best year ever. (Nationwide generated $36.5 million in 2017, largely by liquidating its stake in AveXis.)
McFarland calls gene therapy a “blueprint” that Nationwide aims to recreate with newer cell therapy and regenerative medicine units.
But none other than Phil Johnson, the guy who started it all, has sounded a note of caution. Now a consultant for Nationwide, he was in Columbus a few months ago to dispense some advice. “Don’t try to do everything,” he told leadership. “The challenge is to remain focused and not get too diluted in other areas.”
Another downside of success is losing the talent. Kaspar is the chief scientific officer of Novartis’s AveXis. Rodino-Klapac left to run Sarepta’s gene therapy division. Others could follow, which worries Kevin Flanigan, who replaced Mendell two years ago at the head of the gene therapy center. “We’ve lost good faculty,” he says.
What about Mendell? Now in his 70s, he stopped leading the center to focus on research. He continues to see patients and run Nationwide’s gene therapy trials. He seems to revel in the fact that the biomedical world, so fixated on gene therapy now, is coming to Columbus. He and his colleagues have confounded the coastal elitist expectations. He tells of a recent phone call from a high-ranking East Coast scientist who wondered how he has been able to do all this while prestigious universities—the Harvards and Yales of the world—haven’t?
Mendell laughs. “It’s a typical question from the East Coast to the Midwest,” he says. “We’re good old boys here, I guess.”