Investment in Rare Disease Drug Development Continues to Surge

Rare disease drug developers raised $8.2 billion in private and public equity in the first quarter of 2021, a sharp increase of 166 percent over the $3.1 billion raised by these companies in the first quarter of 2020, according to data from Dealforma and Global Genes.

The numbers for rare disease drug developers reflect strong interest in new technologies that are often first studied in orphan indications, a strong market for biotechnology in general, and an industry flush with cash to be deployed. Therapeutics companies in general did better in the first quarter of 2021 compared to the same time period in 2020, when fears of COVID-19

Rare disease therapeutics venture financing increased 97 percent in the first quarter of 2021 compared to the first quarter of 2020, in line with an overall increase of 129 percent for all therapeutics companies. Among the highlights in March: Elevate Bio’s $525 million in a series C financing to advance a disruptive model to power cell and gene therapies by democratizing access to its enabling technologies, including its process development and CGMP manufacturing capability; and Graphite Bio’s $150 million series B financing to expand and advance its pipeline of experimental targeted gene integration therapies for rare diseases into the clinic.

The market for IPOs continues to remain strong in 2021. Eight rare disease drug developers completed initial public offerings in the first quarter of 2021 raising a combined $1.6 billion. That compared to four completed IPOs of these companies in the first quarter of 2020, which raised a combined $544 million. The four rare disease therapeutics companies completing IPOs in March includes two preclinical companies—Gain Therapeutics ($40 million for lysosomal storage disorders) and Design Therapeutics ($276 million for monogenic repeat expansion disease). The two other companies both had lead assets in phase 1 studies—Longboard Pharmaceuticals ($80 million for rare neurological disease) and Edgewise Therapeutics ($176 million for rare muscle disorders).

While rare disease partnering activity was brisk during March, it didn’t make up for the 23.8 percent dip in deal values at signing and drop in total potential deal values by 13.6 percent compared to the first quarter of 2020. Still, the month saw 12 rare disease focused partnering deals, nine of which had disclosed total potential deal values. The largest among them was BridgeBio subsidiary QED Therapeutics’ potential $2 billion global development and commercialization deal with Helsinn Group for QED’s FGFR1-3 inhibitor, infigratinib, being investigated for FGFR-driven cancers including cholangiocarcinoma. The deal covers all indication except for skeletal dysplasias. No actual dollar amounts paid at signing were disclosed.

Takeda Pharmaceutical was the most active dealmaker in March, signing three exclusive licensing deals. This included an agreement with Ovid Therapeutics for soticlestat for the treatment of developmental and epileptic encephalopathies (valued at $856 million, with $196 million paid upfront). It also included separate agreements with Genevant Sciences for LNP delivered nucleic acid gene therapies for liver fibrosis (value undisclosed but $600 million paid upfront) and with Anima Biotech for RNA-based therapies for neurological diseases (valued at $1.2 billion, with $120 million paid upfront).

M&A values skyrocketed for all therapeutics companies in the first quarter of 2021 compared to the same period in 2020, but especially for rare disease drug developers, where two deals in February—Jazz Pharmaceuticals’ acquisition of cannabinoid drug developer GW Pharmaceuticals for $7.2 billion and Horizon Therapeutics’ buy of Viela Bio for $3.1 billion—accounted for most of the value. In March, therapeutics developers signed $5.3 billion in M&A transactions, none of which involved rare disease drug developers.