Facing a Cash Crunch, a Number of Rare Disease Drug Developers Restructure in October
November 8, 2023
Rare disease focused drug developers ended October with mixed results, remaining slightly ahead of the same period in 2022 in the value of M&A transactions and on a par with venture financings, but down in all the other categories of financings and dealmaking, according to data gathered by DealForma and Global Genes.
Through October 31, total public and private financings for these companies reached nearly $8 billion, down 12 percent from the $9 billion rare disease focused companies had raised during the same period in 2022. At the same time total public and private financings for all therapeutics companies is up 48 percent compared to the same period last year, buoyed by $31 billion in convertible notes offered by Pfizer ahead of closing its deal to acquire Seagen, and $4.5 billion in convertible notes offered by Bristol Myers Squibb to pay for its $5.8 billion purchase of Mirati. If those are taken out, total equity and debt financings of all therapeutics developers are down 15.8 percent compared to the same period in 2022. There were no therapeutics IPOs in October.
Third quarter financial reports revealed the severe cash crunch many rare disease therapeutics developers are facing as eight companies added their names to a growing list of strategic restructurings and workforce cuts designed to extend their cash runways, according to data gathered by Global Genes. Companies announcing workforce cuts in October include Sana Biotechnology (approximately 120 people), Beam Therapeutics (approximately 100 people), Brainstorm Cell Therapeutics (30 percent), Sangamo Therapeutics (more than 160 people), Idorsia (approximately 300 people), and Locanabio, which plans to close by the end of the year. Recent acquisitions also resulted in the workforce reductions with Biogen announcing it will cut 113 people from Reata Pharmaceuticals and Amgen saying it will terminate 350 employees from Horizon Therapeutics.
October, however, was a strong month for three public rare disease drug developers that raised more than $1 billion in combined new capital. Soon after reporting positive results of a mid-stage study in a rare bone disease, Ultragenyx Pharmaceutical tapped the public markets to raise $345 million in a follow on offering of common stock and warrants. Ultragenyx and Mereo BioPharma reported interim data from the phase 2 portion of the phase 2/3 ORBIT study demonstrating that treatment with setrusumab significantly reduced incidence of fractures in patients with the rare bone metabolism disorder osteogenesis imperfecta with at least six months of follow-up and continues to demonstrate ongoing and meaningful improvements in lumbar spine bone mineral density.
Days after winning U.S. Food and Drug Administration approval of its late-onset Pompe disease therapy, Amicus Therapeutics entered into a definitive agreement for a $430 million financing collaboration in which Blackstone Life Sciences and Blackstone Credit agreed to provide Amicus with a $400 million senior secured term loan facilitating a refinancing of existing debt and a $30 million strategic investment in Amicus’s common stock.
Biohaven raised $259 million in a public offering of common stock to advance its pipeline of therapies to treat a broad range of rare and common diseases. In mid-September, Biohaven completed enrollment in a phase 3 pivotal study of its lead investigational therapeutic taldefgrobep alfa for the treatment of the rare neurodegenerative disorder spinal muscular atrophy, which is designed to test the efficacy and safety of taldefgrobep alfa as adjunctive therapy to increase muscle in SMA patients treated with standard of care nusinersen, risdiplam, or the gene therapy Zolgensma.
Venture financings hit $4.6 billion at the end of October, with only one deal reported in the month for a company developing therapeutics for rare disease. Rampart Bioscience raised $125 million in seed and series A financing to create medicines using its DNA-based platform. Rampart’s proprietary platform, called HALO, was developed based on cues from nature to overcome the key limitations and safety concerns of viral and early non-viral gene approaches, and is designed to produce highly potent, durable, and redosable therapies. The company’s lead program is in development for the treatment of hypophosphatasia, a rare, often fatal genetic disease that prevents bone mineralization.
Rare disease focused partnering values at signing through the end of October fell 27.3 percent and potential values are down 8.5 percent. Among a handful of deals, most of which did not disclose financial terms, SpliceBio granted Spark Therapeutics exclusive, worldwide rights to develop, manufacture, and commercialize gene therapy using SpliceBio’s protein splicing platform for the treatment of an undisclosed inherited retinal disease. SpliceBio is eligible for up to $126 million in up front, option payment, development, and commercial milestones, plus undisclosed royalties.
Rare disease focused M&A total deal value numbers fared slightly better as they rose 8.9 percent in 2023 through the end of October compared to the same period in 2022. The largest deal was a royalty purchase agreement signed by PTC therapeutics selling royalty rights to SMA drug Evrysdi to Royalty Pharma for $1 billion upfront that includes options for PTC to sell up to all of its retained royalties on Evrysdi for up to $500 million or for Royalty Pharma to acquire half of such retained royalties for up to $250 million at a later date. PTC maintains all economics associated with up to $250 million in remaining commercial sales milestones associated with Evrysdi global net sales.
Kyowa Kirin acquired rare disease focused biotech Orchard Therapeutics for $16 per share at a 100 percent one-day premium in cash for a total value of $387.4 million. Orchard stakeholders are also eligible for up to $1 in a contingent value right (CVR) upon approval of OTL-200 in the U.S. for MLD, for a total equity value of $477.6 million. OTL-200 is a gene therapy intended for eligible patients with early-onset metachromatic leukodystrophy (MLD), a rare and life-threatening inherited disease of the body’s metabolic system.
Finally, Beam Therapeutics said that Eli Lilly agreed to acquire certain rights under Beam’s amended collaboration and license agreement with Verve Therapeutics, including Beam’s opt-in rights to co-develop and co-commercialize Verve’s base editing programs for cardiovascular disease. Beam will receive $200 million in an upfront payment and $50 million in an equity investment. Beam is also eligible to receive up to $350 million in potential future development-stage payments upon the completion of certain clinical, regulatory and alliance events for a total of up to $600 million in potential total deal value.
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