Rare Disease-Focused Drug Developers Face Summer Doldrums in August
September 17, 2023
A slow August pulled down most categories of financings and deals for rare disease focused drug developers, with total private and public capital raised by these companies reaching $8.8 billion year-to-date, down 12 percent compared to the same period in 2022, according to data gathered by Dealforma and Global Genes.
Raising capital continued to be difficult for many small companies. Seven companies developing rare disease therapeutics announced plans to streamline pipelines and reduce staff to extend their cash resources, which included Intergalactic Therapeutics closing shop because it couldn’t raise capital, Neubase stopping all development programs and looking to sell itself ten months after cutting most of its workforce, and Aravive cutting 70 percent of its workforce to preserve cash in the wake of a late stage trial failure in an orphan ovarian cancer indication. As of the end of August, 42 rare disease focused biotech companies had announced layoffs in 2023.
But some public companies developing rare disease therapeutics raised significant capital in August. Inhibrx, which is developing targeted immunotherapies for oncology and rare diseases, raised $200 million in a private placement financing limited to certain of its existing investors. The company had recently initiated a registration-enabling trial for its experimental treatment for alpha-1 antitrypsin deficiency (AATD), an inherited orphan disease characterized by deficient levels of the AAT protein that causes loss of lung tissue and function and decreased life expectancy.
And Taysha Gene Therapies raised $150 million in a private placement financing, which the company expects will extend its cash runway for two years and support clinical development of its Rett syndrome and GAN pipeline candidates.
Venture capital financings was the only category that saw improving numbers as total financings for privately held rare disease drug developers reached almost $4 billion since the beginning of 2023. The top deals of the month included ADARx Pharmaceuticals’ $200 million series C financing to advance its proprietary RNA delivery platforms and technology for silencing or editing target mRNA. Abcuro’s raised $155 million through a series B financing to advance autoimmune and cancer pipeline through precise modulation of cytotoxic T and NK cells. And Alltrna’s completed a $109 million series B financing to advance it’s transfer RNA platform and first drug candidates toward the clinic for a first indication in stop codon disease, which encompasses thousands of rare and common genetic diseases that stem from premature termination codons. These are also known as nonsense mutations, where the code for an amino acid has been mutated into a premature stop codon.
Partnering deal values remained below 2022 levels for all companies with no deals struck in August with potential deal value above $1 billion. Partnering total deal values focused on rare disease therapeutics was down 12.7 percent year-to-date compared to the same period in 2022, while deal value at signing for these companies was down 36.4 percent. It should be noted that of the 91 rare disease focused collaborations announced since the beginning of 2023, more than half of them (47) did not disclose deal terms, and many of those that assigned a potential total value to a collaboration did not disclose the value of any payments made upfront.
In August, Day One Biopharmaceuticals entered into an exclusive, worldwide license agreement and research collaboration worth up to $316 million with Sprint Bioscience for its VRK1 program, a novel target involved in the regulation of cell division and DNA damage repair. VRK1 has been identified as a synthetic lethal target in tumors where expression of its paralog, VRK2, is lost. Silencing of VRK2 expression via promoter methylation has been noted in the majority of high-grade gliomas and high-risk neuroblastomas, providing a concrete approach for selecting patients with tumors sensitive to VRK1 inhibition. Sprint will receive $3 million upfront, be reimbursed for preclinical research and development expenses, and is eligible to receive additional milestone based payments of up to $313 million plus single-digit royalties.
Rare disease focused M&A transactions were up 9 percent from the beginning of the year to the end of August, but the month saw only a smattering of small deals. Regeneron Pharmaceuticals agreed to acquire Decibel Therapeutics in a deal valued at up to $213 million, building on an existing collaboration between the two companies and accelerating development of gene therapy programs for hearing loss. Decibel’s lead investigational gene therapy DB-OTO, designed to provide hearing to people with otoferlin-related hearing loss, is currently in its first clinical trial.
Regeneron is paying $4.00 per share for Decibel common stock with an additional non-tradeable contingent value right (CVR) to receive up to $3.50 per share in cash upon achievement of certain clinical development and regulatory milestones for Decibel’s lead investigational candidate, DB-OTO, within specified time periods. The proposed acquisition values Decibel at a total equity value of approximately $109 million based on the amount payable at closing, and a total equity value of up to approximately $213 million if the CVR milestones are achieved.
Harmony Biosciences agreed to acquire Zynerba Pharmaceuticals, a developer of transdermal cannabinoid therapies for orphan neuropsychiatric disorders including fragile X syndrome, for up to $200 million and contingent value rights worth up to $140 milllion. Harmony is paying $1.11 per share in cash, or $60 million, plus one non-tradeable CVR per share, representing the right to receive potential additional payments of up to $140 million, subject to the achievement of certain clinical, regulatory, and sales milestones.
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