Rare Disease Drug Developers End Third Quarter with Mixed Results

Rare disease focused therapeutics developers ended the third quarter of 2023 on par with the same period in 2022 for venture financings and M&A, but down in all other categories of financings and deals according to data collected by Dealforma and Global Genes.

Although rare disease focused mergers and acquisitions remained on par with 2022 numbers at $22.5 billion, they constitute a smaller percent of total numbers, comprising just 21 percent of all therapeutic M&A in 2023, compared to 35 percent at the end of the third quarter of 2022. Just a handful of small M&A deals were announced in September.

Rare disease focused partnering total deal values also continued to slide, ending the third quarter at $24 billion, down 8.5 percent compared to the same period in 2022. Deal values at signing also continued to decline, with just $1.2 billion exchanging hands so far this year. This number is tricky due to a high number of announced partnering deals that don’t disclose upfront payments.

In September, Japanese pharmaceutical Otsuka entered into a multi-target collaboration with ShapeTX, valued at up to $1.5 billion, to apply ShapeTX’s AAVid capsid discovery platform and transgene engineering technology along with Otsuka’s expertise in genetic payload design and ophthalmology to develop novel treatment options for people living with serious eye diseases.

Verge Genomics entered a multi-target four-year collaboration with Alexion, AstraZeneca Rare Disease to identify novel drug targets for rare neurodegenerative and neuromuscular diseases. Verge will receive up to $42 million, consisting of upfront fee, equity, and near-term payments, with a potential total deal value of $840 million plus potential downstream royalties.

Takeda signed an exclusive, worldwide license agreement for AcuraStem’s PIKFYVE program to develop and commercialize ASOs, including AS-202, for the treatment of the rare, neurodegenerative condition amyotrophic lateral sclerosis. AcuraStem will receive up to $580 million in upfront and milestone payments if all future clinical, regulatory, and commercial milestones are achieved during the term of the agreement plus tiered royalties on potential net sales of any commercial products resulting from this license.

Financing for privately held rare disease focused therapeutics companies remained on par with last year, with $4.5 billion raised in the first nine months of 2023. Still, it was well below the $7.9 billion that flowed into these companies during the boom year of 2021. In September, Avalyn Pharma closed an oversubscribed $175 million series C financing, which it plans to use to continue development of its portfolio of inhalation therapies for interstitial lung disease that improve upon currently approved medications, and advance lead clinical assets, AP01 and AP02, into mid-stage clinical trials.

Star Therapeutics closed an oversubscribed $90 million series C financing that will support clinical advancement of VGA039, a first-in-class antibody currently being evaluated in a phase 1a/1b study for von Willebrand disease, a lifelong bleeding disorder in which blood does not clot properly, and also to continue the company’s approach as an innovation engine to generate additional biotech companies focused on discovering and advancing novel antibody therapies, each targeting multiple diseases.

The year has been difficult for public biotechs focused on rare disease therapeutics with total raised in public equity and debt for these companies just $6.8 billion at the end of the third quarter. Global Genes tracked 51 companies announcing major restructurings, workforce reductions, seeking strategic alternatives, or closing shop since the beginning of the year. Many are stopping preclinical activities to focus on lead candidates with the best commercial potential.

In September, NexImmune slashed 53 percent of its workforce, or 25 employees; PTC Therapeutics let go of 25 percent of its workforce and prioritize late stage and commercialized programs; and 2seventy bio cut 176 people, 40 percent of its employees, with Nick Leschly stepping down as CEO, but remaining as chairman of the board.

At the same time, several public rare disease focused companies raised significant capital in September. One day after reporting that its lead candidate paltusotine met the primary and all secondary endpoints in a phase 3 study evaluating treatment of patients with acromegaly, Crinetics Pharmaceuticals raised $350 million in a public offering of common stock. BridgeBio Pharma raised $250 million in a private investment in public equity. Rocket Pharmaceuticals, on the heels of an agreement with the U.S. Food and Drug Administration on the phase 2 pivotal trial design of its experimental therapy for the rare and deadly cardiomyopathy Danon disease, priced a $175 million in a public offering of common stock. And, two days after reporting positive top-line results of its experimental treatment for Prader-Willi syndrome, Soleno Therapeutics raised $120 million in a public offering of common stock and private securities purchase agreement.

Although two therapeutics companies completed initial public offerings in September, raising hopes that the market for biotech was easing up, it remains closed for rare disease focused companies. Of the 16 drug developers that completed IPOs year-to-date in 2023 to raise $2.1 billion, almost twice as the same period in 2022, but only one, Azitra, was focused on rare diseases and its IPO haul was $8 million.