Rare Disease Biotechs Focus on Near-Term Prospects as Restructurings Continued in November

Eleven rare disease focused therapeutics developers announced strategic restructurings in November as the sector raised $8 billion year-to-date in public and private equity and debt in 2023, down 15 percent compared to the same period in 2022, according to data gathered by Dealforma and Global Genes.

The restructurings included Locanabio shutting down by the end of the year and Timber Pharmaceuticals filing voluntary bankruptcy under Chapter 11. Companies not experiencing a cash crunch also announced pipeline and research prioritizations, dropping early-stage programs to focus on near term opportunities. These companies included Crispr Therapeutics, which recently won FDA approval for its sickle cell gene therapy; Travere Therapeutics, which will focus its resources on gaining full approval of Filspari in IgAN; and cash rich Orna Therapeutics, which called its downsizing a “defensive reduction.”

Two companies went the reverse merger route to maximize shareholder value. Selecta Biosciences merged with Cartesian Therapeutics, a clinical stage biotech developing RNA cell therapies for autoimmune diseases, while Graphite Bio exited the rare disease space through a reverse merger with Lenz Therapeutics, which will pursue therapeutics that address presbyopia. Graphite’s founders formed a new company, Kamau Therapeutics and licensed Graphite’s genome editing assets to advance a potential first-in-class hematopoietic stem-cell therapy engineered to restore normal adult hemoglobin in patients with sickle cell disease.

Rare disease focused venture financings in 2023 trailed down 3 percent at $4.9 billion, compared to $5.1 billion raised by these companies in 2022, even as the pace of company launches continues. Dutch biotech VectoryTx closed a $138 million (€129 million) series A financing round to advance its vectorized antibody programs in neurodegenerative diseases, including its lead vectorized antibody program targeting TDP-43 for the treatment of with amyotrophic lateral sclerosis (ALS). VectorY’s platform combines the promise of precise therapeutic antibodies with one-time AAV-based delivery to the CNS.

Rare disease-focused public financings, at $8.1 billion, remains 15 percent below the $10.2 billion raised by these companies in 2022. The one bright spot in November was the second rare disease focused initial public offering in 2023. Lexeo Therapeutics raised $100 million to advance its gene therapies for genetically defined cardiovascular diseases and APOE4-associated Alzheimer’s disease. Lexeo’s lead gene therapy candidate, LX2006 for Friedreich’s ataxia cardiomyopathy, is currently being evaluated in a phase 1/2 clinical trial with a readout expected in the middle of 2024.

Although rare disease focused collaborations are up 7 percent in 2023 compared to the same period in 2022, deal value at signing remains flat. Three rare disease focused biotechs signed $1 billion plus deals in November.

In a research collaboration valued at up to $2.4 billion, AstraZeneca will leverage Cellectis’ gene editing technologies and manufacturing abilities to develop up to 10 novel cell and gene therapy candidates in areas of unmet need, including oncology, immunology, and rare diseases. AstraZeneca will have an option for a worldwide exclusive license on the candidate products, to be exercised before IND filing. Cellectis will receive $25 million in an upfront payment and an equity investment of up to $220 million.

Novartis entered into two deals—licensing South Korean pharma Chong Kun Dang’s phase 1 experimental small molecule for the treatment of Charcot-Marie-Tooth disease for $80 million in an upfront payment and up to $1.2 billion in potential milestones, and an exclusive, global license for certain Legend Biotech CAR-T cell therapies targeting DLL3 for $100 million in an upfront payment in a deal valued at up to $1 billion. Their agreement grants Novartis exclusive worldwide rights to develop, manufacture and commercialize these cell therapies, and Novartis may apply its T-Charge platform to their manufacture.

Finally, rare disease focused M&A in 2023 is up 9 percent in total potential deal value compared to the same period in 2022, but deal value at signing is down 6 percent as more buyouts include payouts based on milestone. For example, Merck’s acquisition of Caraway Therapeutics is valued at up to $610 million, but it includes an undisclosed upfront payment and earnout milestones associated with the development of certain pipeline candidates. Caraway is a preclinical developer of small molecule therapies for genetically defined neurodegenerative and rare diseases, and is utilizes its platform to develop insights into lysosomal function and small molecule ion channel modulation to advance a pipeline of precision candidates with disease-modifying potential.