Vertex shells out $950 million to acquire a company working on a diabetes cure

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Boston-based Vertex Pharmaceuticals, maker of a suite of cystic fibrosis (CF) drugs, is aggressively expanding its drug development portfolio with the acquisition of Semma Therapeutics, a regenerative medicine company that's been searching for a potential cure to Type 1 diabetes.

Here's how Semma's intervention works: It applies stem cell therapy to generate new beta cells - the cells responsible for insulin production - and a medical device is implanted to protect the cells from being attacked by the patient's immune system. While the tech may sound like science fiction, Vertex clearly doesn't think so based on the huge check it's written to acquire the company, and Semma claims that early animal trials have shown promise.

Putting it in context: Vertex has been on a partnership and acquisition spree lately, as it pursues nontraditional therapies for diseases that have, so far, been impossible to cure.

• In addition to stem cell therapies, Vertex has invested in several innovative approaches in search of the next potential miracle drug. In June, Vertex poured $420 million into strategic partnerships and acquisitions to further its research efforts around muscular dystrophy, another disease without a cure. Investments included a $175 million deal with CRISPR Therapeutics - a genetic therapeutics company that uses the cut-and-paste CRISPR/Cas9technique of genetic editing to pursue new, innovative treatment for muscular dystrophy - and a $245 million acquisition of gene-editing company Exonics. A cure for muscular dystrophy, if one should surface, would not only bring relief to millions of people but could also save millions of dollars in treatment costs: The two most common types of muscular dystrophy have been estimated to cost the US over $900 million annually.
• Business is booming at Vertex, driven by the company's near 100% treatment coverage for CF patients - but that likely has it searching for a new growth outlet. Vertex is expected to have treatments on the market to cover 90% of CF cases by 2020, with the company considering a gene therapy approach to cover the remaining 10% of patients. That will likely see the company improve upon its already astronomical revenue: The company posted over $940 million for Q2 2019, exceeding industry estimates for the fourth quarter in a row thanks to the success of its three CF treatments. However, if the company wants to continue growing at a steady clip, it will most likely want to branch out into new treatment areas. That's why a wide net approach to investment - pouring money into companies with early-stage research and high potential market caps like Semma - could be good for Vertex: Diabetes treatment cost the US healthcare system $237 billion in 2017, per American Diabetes Association estimates.

The bigger picture: Vertex isn't the only pharma company looking at innovative approaches to drug development.

Pharma companies are exploring everything from genetics to AI in search of the next big drug development breakthrough. The current drug development pipeline is very expensive and slow, with the average treatment requiring $2.6 billion and seven years before it comes to market.

To try and address this pain point, pharma giant GSK spent $300 million to secure a four-year exclusive partnership to codevelop drugs based on direct-to-consumer genetic testing company 23andMe's mountains of genetic data. And while not a pharmaceutical firm, earlier this week Hong Kong-based Insilico revealed that its AI-powered drug discovery system was capable of generating new potential drugs in less than a month's time, and with promising early results from animal testing.

As companies search for cheaper drug development pipelines and treatments for currently incurable diseases, we expect to see more out-of-the-box processes being utilized by big pharma.

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