Rare Disease Therapeutics Drug Developers Suffer Through Brutal First Half of 2022

Boom times for biotech ended abruptly in the first half of 2022, making access to capital increasingly difficult for life sciences therapeutics developers as investment fell 39 percent over the same period a year ago, according to data gathered by Global Genes and Dealforma.

After several boom years, stock indexes across the board tumbled over most of the first half of 2022, although their decline has slowed. The SPDR S&P Biotech Select Industry Index fell to 5770.57 on June 30, 2022, a 45 percent from its close a year before.

While market corrections are inevitable, many generalist investors have been spooked by these developments. The good news is that there is still plenty of money to be deployed as many venture and private equity firms raised enormous amounts of capital during boom times. Consider the largest VC financings announced in June 2022: Ultima Genomics, which emerged from stealth mode with $600 million to catalyze sequencing at scale; and National Resilience, which raised $625 million in a series D financing to reinvent biomanufacturing and keep pace with the innovation in drug discovery.  

Venture financings, a bright spot for rare disease drug developers, many of which had launched over the past few years to test their innovative technologies, were down 24.3 percent in the first half of 2022. That compared to a drop of 45.4 percent for money pouring into all private therapeutics companies.

Top financings went into second and third rounds for companies working on gene therapy and gene editing technologies. In June, Frontera Therapeutics raised $160 million in a series B financing round to support the development of its lead gene therapy candidate for the treatment of a rare inherited eye disorder.

Biotech IPOs have slowed to a trickle, down 87 percent over the same period in 2021. Twelve companies completed IPOs in the first half of 2022, half of which were rare disease drug developers. As a group, rare disease companies accounted for almost two third of the capital raised. There were no IPOs among therapeutics companies in June 2022.

Many small- and medium-sized rare disease therapeutics drug developers struggled to raise capital in the public markets, which were down 25 percent compared to the same period in 2021. However, companies that went to the market after reporting positive trial results for the most part managed fine.

In June, Cogent Biosciences took advantage of a bump up in its stock price to raise $172.5 million in an underwritten public offering, one day after reporting reported positive initial data from its ongoing phase 2 clinical trial evaluating lead compound bezuclastinib in patients with a rare hematologic disorder; and Day One Biopharmaceuticals took advantage of a doubling of its share price on positive initial data from its pivotal mid-stage trial of lead candidate tovorafenib in relapsed pediatric low-grade glioma, to raise $172.5 million in its public offering.

But investors punished rare disease drug developers who reported trial failures. Global Genes counted 24 rare disease focused companies that cut their workforces and axed programs to extend their cash runway.

Though partnering deal values at signing fell 48 percent for deals focused on rare diseases, potential deal values were up 15.2 percent. Licensors and collaborators took a cautious approach. Among the seven deals that had a potential value of $1 billion or more, four were options to license. The one significant deal in June was Precision Biosciences’ development and commercialization deal with Novartis focused on in vivo gene editing to treat sickle cell disease and other hematologic.

Therapeutics M&A grew 20.6 percent for all therapeutics deals but fell 33 percent for rare disease focused companies in the first half of 2022, compared to the same period in 2021. Only a handful of transactions were valued at $1 billion or more. In June, Bristol Myers Squibb paid $4.1 billion to gain access to Turning Point Therapeutics’ pipeline of candidates targeting rare cancer mutations. It was the second largest M&A transaction so far this year, following Pfizer’s $11.6 billion buyout of migraine drugmaker Biohaven.