Rare Disease Therapeutics Developers Weather Harsh First Quarter 2023 with Deals a Bright Spot

Companies focused on developing drugs for rare diseases survived a harsh first quarter of 2023, as total equity and debt financing reached just $3.2 billion, down 27 percent from the $4.4 billion raised by these companies during the same period in 2022, according to data from Dealforma and Global Genes.

Many companies had hoped that the new year would bring a turnaround in investor sentiment for biotech and an easing of access to capital, something that has yet to happen. Instead, a major financing institution for the industry, Silicon Valley Bank, collapsed in early March, leaving some companies temporarily without the ability to access their funds.

Companies found that investors remain risk averse and need to see positive milestones before funding additional development. If the milestone wasn’t reached or was not imminent, many companies would have to pursue strategic alternatives, laying off employees and prioritizing pipelines to preserve their cash runway. In the first quarter of 2023, Global Genes tracked 19 rare disease drug developers that announced restructurings, including three companies that closed their doors and one that filed for bankruptcy. That compared to seven companies reporting restructurings in March 2022.

Although no rare disease drug developer completed an initial public offering in the first quarter of 2023, and public company equity and debt was 30 percent below the amount raised during the same period last year, privately held rare disease focused companies, often developing genetic medicines, continued to attract significant amounts of capital. In the first quarter of 2023, venture investment in all therapeutics was down 40.6 percent while it was down just 1.2 percent in rare disease therapeutics, compared to the first quarter 2022.

Several rare disease focused biotechs raised significant venture capital in March. Chroma Medicine completed a $135 million series B financing to advance its single-dose epigenetic editing therapies and support expansion of its platform designed to enable precise gene regulation while preserving genomic integrity. Swiss biotech Noema Pharma has closed CHF 103 million ($112 million) in a series B financing round to support continued development of a pipeline focused on central nervous system disorders characterized by imbalanced neuronal networks that target orphan and mainstream central nervous system disorders.

Rapport Therapeutics launched with $100 million in a series A financing to support its novel platform to discover precision targeted small molecule drugs to treat neurological disorders. Ring Therapeutics raised $86.5 million in series C funding to address the limits of gene therapy with its commensal virome platform that has the potential to treat patients with pre-existing immunologic barriers and/or those requiring redosing. QurAlis closed an oversubscribed $88 million series B financing to advance development of its precision medicines for amyotrophic lateral sclerosis and other neurodegenerative diseases with genetically validated targets. Finally, Mediar Therapeutics raised $85 million in a series A round to advance its first-in-class therapies that halt and even reverse the course of fibrosis into clinical studies in 2024.

First quarter 2023 total potential partnering deal values for rare disease drug developers were down 8.6 percent, but deal values at signing, the actual money that changed hands, fell 27 percent compared to the first quarter of 2022. Two significant deals in March included a potential $1.9 billion strategic collaboration agreement signed by Generation Bio and Moderna, and an 8-year extension to a 2016 neurodegeneration deal between Evotec and Celgene, now part of Bristol Myers Squibb, for a potential deal value of $4 billion.

Generation Bio and Moderna will combine Moderna’s biological and technical expertise with core technologies of Generation Bio’s non-viral genetic medicine platform to developing novel nucleic acid therapeutics, including those capable of reaching immune cells, to accelerate their respective pipelines of non-viral genetic medicines. Moderna may advance two immune cell programs, each of which may use a jointly developed cell-targeted lipid nanoparticle (ctLNP) to deliver high-capacity, engineered, closed-end DNA (ceDNA). Moderna may also advance two liver programs, each of which may use a liver-targeted ctLNP developed by Generation Bio to deliver ceDNA. Moderna retains an option to license a third program for either immune cells or the liver. Moderna will pay Generation Bio $40 million in upfront cash and a $36 million equity investment issued at a premium over recent share prices. Moderna will fund all collaboration work, including a research pre-payment. Generation Bio is eligible for future development, regulatory and commercial milestone payments, as well as royalties on global net sales of liver-targeted and immune cell-targeted products commercialized under the agreement.

Evotec extended and expanded the strategic neurodegeneration partnership with Bristol Myers Squibb, for 8 years that had already been proved highly productive in generating a promising pipeline of discovery to clinical-stage programs, leveraging several of Evotec’s modality-agnostic precision medicine platforms to generate a pipeline of discovery and preclinical programs. A first program, EVT8683, was in-licensed by Bristol Myers Squibb in September 2021 and has proceeded into the clinic. Under the new agreement, Evotec will receive $50 million upfront, undisclosed license and performance milestone payments, as well as tiered royalties up to low double-digit percentages on product sales for a potential total deal value of $4 billion.

Finally, while March was relatively dry for M&A activity in the rare disease arena, deal values remained significantly higher in the first quarter of 2023 compared to the first quarter of 2022, up 54 percent.