Despite Turmoil, Rare Disease Drug Developers See Uptick in Venture Funding in February

Market volatility, rising inflation, and tension from what would soon become Russia’s aggressive incursion into Ukraine roiled therapeutics drug developers across the board as sources of capital declined significantly for these companies in February compared to the previous month and the same time last year, according to data from DealForma and Global Genes.

Venture financing of rare disease focused therapeutics companies, though, was one bright spot and was up 17.7 percent year-to-date compared to the same period in 2021, even as it fell 31 percent for all therapeutics startups. Dewpoint Therapeutics raised $150 million in a series C financing to advance a pipeline that applies a growing understanding of biomolecular condensates to drug discovery, with programs spanning oncology, rare neuromuscular diseases, and cardiopulmonary and virology indications.

Star Therapeutics emerged from stealth mode with $100 million in funding to pursue drug discovery and development in rare diseases with a plan of generating drug programs that target multiple diseases with a single therapy and spinning out the programs into new companies, the first of which is Electra Therapeutics, which completed an $84 million venture round to build a pipeline of novel antibody therapies targeting SIRP, a family of cell surface receptors on various immune cell types. Electra’s lead candidate, ELA026, is currently in phase 1 clinical studies, including a trial in secondary hemophagocytic lymphohistiocytosis (sHLH), a rare life-threatening inflammatory disease.

The total equity and debt raised by rare disease focused therapeutics drug developers fell 59 percent year-to-date compared to the same period in 2021, and 32 percent for all therapeutics companies.

Secondary offerings and other public financings had the largest declines, as companies raised less than $1 billion through these public equity and debt offerings, excluding IPOs. The numbers were only bolstered by Bristol Myers Squibb, which issued four series of convertible notes that accounted for $6 billion of the total raised in February 2022.

IPOs slowed dramatically for all therapeutics companies and were down 64 percent year to date for companies developing therapies for rare diseases. Only one rare disease drug developer completed an initial public offering in February. In the first week of February, rare cancer drug developer, Arcellxm raised $143.2 million in an initial public offering of 9.5 million shares at $15 per share, the midpoint of its proposed range. The company’s lead product candidate, CART-ddBCMA, is being developed for the treatment of relapsed or refractory multiple myeloma, a rare blood cancer, in an ongoing phase 1 study.

In the dealmaking realm, M&A slowed for therapeutics developers with just $6 billion in deals with disclosed values and just one acquisition of a rare disease focused deal. Intellia Therapeutics acquired privately held Rewrite Therapeutics to expand its toolbox with a versatile DNA writing platform that complements its existing CRISPR/Cas9 and base editing technologies. Intellia paid Rewrite shareholders $45 million in an upfront payment and an additional $155 million in pre-specified research and regulatory approval milestones through a mix of Intellia common stock and cash.

Partnering transactions were another bright spot in February with rare disease focused therapeutics companies entering 16 research and licensing collaborations, only five of which had disclosed upfront payments. Total disclosed potential deal values of these transactions were only one third of the total potential disclosed values announced in January, but of the four deals potentially valued at $1 billion and above, two were focused on rare disease therapeutics.

Code Biotherapeutics, a company pioneering targeted non-viral delivery of genetic medicines, entered a collaboration and option agreement valued at up to $2 billion with Takeda to leverage Code Bio’s proprietary targeted 3DNA non-viral genetic medicine delivery platform to design and develop gene therapies for rare disease indications. The value of the initial upfront payment was not disclosed. The companies will design and develop a targeted gene therapy leveraging Code Bio’s 3DNA platform for a liver-directed rare disease program, plus conduct additional studies for central nervous system-directed rare disease programs. Takeda has the right to exercise options for an exclusive license for four programs.

Remix Therapeutics, a biotech developing small molecule therapies designed to reprogram RNA processing and address the underlying drivers of disease, signed a strategic collaboration with J&J subsidiary Janssen Pharmaceutica for the discovery and development of small molecule therapeutics that modulate RNA processing using Remix’s REMaster drug discovery platform, which makes it possible to identify patterns in RNA processing and exploit them to modulate gene expression to alter the way genes are read from the genome, to correct, enhance, or eliminate the gene message, and thereby address disease drivers at their origin. Remix will receive an initial payment of $45 million and is eligible to receive total payments potentially exceeding $1 billion.