Rare Disease Drug Developers Struggle Through a Difficult Finance Environment in 2022
January 9, 2023
Therapeutics developers often had to rely on issuing a stock offering on the heels of achieving a clinical milestone in order to fund ongoing operations. Global Genes counted 40 rare disease drug developers that announced restructurings—making significant cuts to their workforce and development pipelines to extend their cash runways. Three of these companies closed their doors after exploring strategic options and failing to find a viable path forward.
The total number of rare disease drug development initial public offerings fell to eight in 2022 compared with 23 in 2021. These companies raised just $833 million through IPOs 2022, an 81 percent drop from the previous year.
Venture investors had plenty of cash to deploy but were more selective in where they chose to put their investments. They made a total of 71 investments into rare disease focused drug developers for a total of $5.2 billion in 2022, down from 106 such deals with a total value of $8.8 billion invested in 2021. Of those, 37 were series A or seed financings, totaling $1.7 billion. Most of these early-stage financings were for companies developing genetic medicines—gene editing, gene and cell therapy, and RNA based therapies.
Partnering activity for rare disease drug developers also fell in 2022. The total number of deals with disclosed value fell to 51 from 72 in 2021. The total potential values of deals in 2022 reached $49 billion, down from $60 billion for the same period a year ago. Discovery and early-stage deals continued to be heavily backloaded with the value at signing in 2022 at $2.6 billion, down 45 percent from the $4.8 billion garnered at signing in 2021.
The year did finish with the closing of some sizable deals. In mid-December GSK entered into a development and commercial license agreement with Wave Life Sciences for Wave’s preclinical RNA editing program targeting alpha-1 antitrypsin deficiency, WVE-006. The discovery collaboration has an initial four-year research term and a discovery collaboration that enables GSK to advance up to eight programs and Wave to advance up to three programs, leveraging Wave’s PRISM platform and GSK’s expertise in genetics and genomics. In addition to these programs, GSK receives the exclusive global license for Wave’s preclinical program for AATD called WVE-006, which is designed to correct mutations in an RNA transcript, thereby avoiding permanent changes to the genome that occur with DNA-targeting approaches. The deal has a potential value of $3.5 billion with Wave receiving an upfront payment of $170 million, comprising a cash payment of $120 million and a $50 million equity investment.
Rare disease drug developers came close in 2022 to matching the level of M&A activity from the previous year, thanks to a large extent to the biggest deal of the year—Amgen’s acquisition of rare disease focused Horizon Therapeutics for $27.3 billion. Horizon has 12 marketed medicines and a pipeline with more than 20 development programs. For Amgen, the acquisition strengthens its portfolio by adding a complementary portfolio of medicines that address the needs of patients suffering from rare diseases and capitalizes on Amgen’s legacy in inflammation and nephrology, and its global scale to enhance the growth potential of Horizon’s portfolio.
M&A was also the one area where the number of rare disease therapeutics focused deals with disclosed values rose to 40 in 2022 compared to 32 in 2021. The deal value at signing for these transactions was also up 2 percent to $50.6 billion compared to $49.5 billion in 2021.
While it is likely that capital will continue to be constrained as the industry heads into 2023, the U.S. approval of three gene therapies and a growing pipeline of innovative therapies, some of which promise potential cures, has companies and investors gathering in San Francisco for the first in-person JP Morgan Healthcare conference week since the outbreak of the COVID-19 pandemic. That could help set the tone for the year ahead for the industry.
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