Dismal Fundraising Quarter for Rare Disease Drug Developers Even as Potential Partnering Values Surge

The first quarter of 2022 was dismal for rare disease therapeutics focused companies looking to raise capital as financings fell nearly 50 percent compared to the same period in 2021, according to data from DealForma and Global Genes.

Although there was a surge in potential partnering deal values, the cash changing hands at deal signing dropped significantly.

Though Wall Street’s love affair with biotechnology began souring in the fourth quarter of 2021, the situation continued to erode as a growing list of companies were forced to prioritize programs and downsize to extend their cash runways. The change in sentiment affected all therapeutics developers’ ability to raise cash as public and private avenues of capital slowed dramatically.

Companies were also affected by a growing number of negative clinical and regulatory developments that dimmed their prospects. An analysis by Life Sci VC found three dozen small biotech restructurings since the fall of 2021. Eight rare disease companies announced layoffs and program prioritization during the first quarter of 2022 to extend their cash runways, including Orchard Therapeutics, Bluebird bio, Ovid Therapeutics, Passage Bio, Magenta Therapeutics, Orphazyme, and Taysha Gene Therapies.

Compared to the first quarter of 2021, initial public offerings came to a near standstill in the first quarter of 2022, down 72 percent as far as capital raised for rare disease drug developers, and down 85 percent for all drug developers. In the first quarter of 2021, 39 therapeutics companies completed IPOs raising $5.1 billion, compared to nine companies raising $762 million through IPOs in the first quarter of 2022. Among rare disease drug developers, nine companies completed IPOs in the first quarter of 2021 raising $1.8 billion compared to four companies completing IPOs in 2022 raising $499 million.

A total of four of the nine companies that completed IPOs in the first quarter of 2022 were focused on therapeutics for rare disease, and their IPOs accounted for two thirds of the capital raised through IPOs in the quarter: Amylyx Pharmaceuticals’ $190 million IPO, Arcellx’ $142 million IPO, Vigil Neuroscience’s $98 million IPO, and AN2 Therapeutics’ $69 million IPO.

In 2022, rare disease M&A deal values at signing were down 77 percent year to date compared to the same period in 2021, while deal values at signing for all therapeutics developers fell 46 percent compared to last year. UCB’s acquisition of Zogenix in February for $1.9 billion, a 66 percent premium to its share price ahead of the deal, was the only major transaction in the rare disease space. Zogenix’ Fintepla is approved as a treatment for Dravet syndrome and is being developed for other rare epilepsies.

One bright spot in an otherwise down quarter was the potential for partnering as total potential deal values rose 60 percent for rare disease focused deals and up 54 percent for all therapeutics deals compared to the first quarter of 2021. However, these numbers are tempered by the fact that the licensing or collaborating partner provided just a fraction of the potential deal value in cash and equity upfront. An analysis of the numbers shows that upfront cash and equity was 6 percent of the potential deal value for rare disease therapeutics focused deals and 5 percent for all therapeutics deals for partnerships and collaborations announced in the first quarter of 2022. This compares to upfront cash and equity of 15 percent of the potential deal value for rare disease therapeutics focused deals and 13 percent for all therapeutics deal for partnerships and collaborations announced in the first quarter of 2021.

It will be interesting to see what happens in the year going forward. Although the first quarter numbers are bleak across the board for therapeutics developers, it does come after two years of astounding growth that was bound to slow.