Rare Disease Drug Developers Continue to Face Headwinds in May, Realign Priorities to Conserve Cash

May was a difficult month for raising capital for therapeutic drug developers, with public and private capital raised by companies focused on rare diseases down 42.4 percent year-to-date compared to the same period in 2021, according to data from Dealforma and Global Genes.

Comparisons to the same period in 2021, when the biotech boom was still going strong, are stark for therapeutics drug developers in general, and especially for public companies that have seen their market capitalization decimated over the past year, making it difficult to access to capital needed to fund their programs.

Global Genes added five companies in May to a growing list of rare disease drug developers that have restructured—cut their workforce and prioritized pipelines—to conserve cash: BridgeBio, Avalo Therapeutics, Orion, Agios, and Scholar Rock.

BridgeBio took several steps to reduce its burn rate, build cash, and focus its pipeline. The company reduced staff and out-licensed six programs in recent weeks as part of that effort. BridgeBio also sold a priority review voucher for $110 million. It also entered an exclusive license with Bristol Myers Squibb to develop and commercialize BBP-398, a potentially best-in-class SHP2 inhibitor, in oncology. The deal, which was the largest partnering deal for a rare disease focused biotech in May, expands on an earlier between BridgeBio and Bristol Myers Squibb, and gives BridgeBio an upfront payment of $90 million with the potential for up to $815 million in development, regulatory and sales milestone payments, and tiered royalties in the low- to mid-teens.

Chimerix raised money to support its most advanced clinical-stage program, in development for H3 K27M-mutant glioma, by selling exclusive worldwide rights to its FDA-approved medical countermeasure for smallpox, Tembexa, to Emergent BioSolutions for up to $337.5 million plus royalties.

Although raising capital in the public markets is difficult, timing can make a difference. Metabolic disease focused biotech Rezolute raised $130 million in an underwritten registered direct offering on the heels of reporting positive results from its Phase 2b RIZE study of RZ358 in patients with congenital hyperinsulinism.

The only initial public offering in May was completed by PepGen, a company advancing next generation oligonucleotide therapies to treat rare neuromuscular and neurological diseases, which priced an initial public offering of 9 million shares of common stock at $12.00 per share to raise $108 million. Going public in a bear market, PepGen offered 1.8 million more shares than it had anticipated and priced below its targeted range of $13 to $15 per share. PepGen’s says its cell-penetrating peptide technology for oligonucleotide delivery will dramatically enhance delivery of oligonucleotides to key tissues, while also improving safety compared with competing therapies.

Venture financings, down 45.5 percent for all therapeutics companies year-to-date compared to the same period in 2021, is down only 25.7 percent for rare disease drug developers. Venture capital firms raised a lot of cash during the pandemic to deploy in a range of new technologies aimed at deeper biological understanding to address and refine genetically targeted precision medicines.

Kriya Therapeutics raised $270 million in a series C financing to advance an ecosystem for delivering best-in-class technologies and medicines in gene therapy, with core business units in technology, manufacturing, R&D, and therapeutics. Krya leverages a proprietary computational platform, in-house manufacturing infrastructure, and rational design toolkit to bring potentially transformative gene therapies to a broad range of diseases, while improving speed to market and reducing cost.

MOMA Therapeutics raised $150 million in a series B financing to advance a drug discovery platform that exploits a key vulnerability inherent to all enzymes. By focusing its platform on disease-causing proteins, MOMA aims to develop precision medicines for patients with significant unmet medical needs.

Dianthus Therapeutics launched with $100 million in a series A financing to advance the next generation of selective complement therapeutics to treat severe and rare autoimmune diseases. The company says its monoclonal antibodies have the potential to overcome the limitations of current complement therapeutics because they target only the active form of the C1s complement protein, enabling a lower dosing volume and less frequent administration.

One bright spot for biotech is the fact that Big Pharma is flush with cash for deals and partnerships, which it is beginning to deploy (Pfizer paid $11.6 billion for neurologic drug developer Biohaven Pharmaceutical in May), some of which will naturally be funneled into the rare disease space with the growing focus on genetically-targeted medicines.