RARE Daily

Tectonic Merges with Avrobio, Raises $130.7 Million to Advance GPCR-Targeted Therapeutics

January 30, 2024

Rare Daily Staff

Tectonic Therapeutic is merging with gene therapy biotech Avrobio in an all-stock transaction in which the combined company will focus on advancing Tectonic’s novel GPCR-targeted therapeutic proteins to address indications with high unmet need and no approved therapies.

Under the terms of the agreement, Avrobio will acquire 100 percent of the outstanding equity interests of Tectonic in an all-stock transaction. After the merger is complete, the combined company will be led by Tectonic CEO Alise Reicin and is expected to operate under the name Tectonic Therapeutic, Inc. and trade on Nasdaq under the ticker symbol “TECX.”

Avrobio, which was developing gene therapies, halted development of its programs in July 2023 to explore strategic alternatives. In May 2023, the company sold its cystinosis gene therapy program to Novartis for $87.5 million, retaining its programs in Gaucher disease, Hunter syndrome, and Pompe disease. At that time, the company said proceeds from the sale were expected to extend the company’s cash runway into the fourth quarter of 2024.

“This transaction is the culmination of a comprehensive review of strategic alternatives, and our Board believes that the merger with Tectonic is in the best interests of our shareholders,” said Erik Ostrowski, interim CEO and chief financial officer of Avrobio. “Tectonic has unparalleled expertise in the biochemistry and biophysics of GPCRs, and a highly accomplished team poised to advance their rich pipeline of innovative therapies.”

Tectonic is developing novel GPCR-targeted therapeutic proteins. The company is prioritizing compelling GPCR targets to address indications that are not currently well-served by small molecule-based approaches. The selectivity and specificity profile of biologics is one of the most important advantages of Tectonic’s approach over traditional small molecule drug discovery. However, most GPCRs have not historically been amenable to standard biologics discovery methods because of the instability and conformational heterogeneity of the GPCRs themselves. Tectonic’s GEODe platform was developed to overcome the challenges of GPCR-targeted biologics discovery by combining GPCR biochemistry and receptor engineering strategies, proprietary antibody libraries and screening protocols, and structure-guided protein engineering for therapeutic candidate optimization.

Tectonic’s first two targets are for indications with no approved therapies. Lead program, TX45, is a Fc-relaxin fusion protein in development targeting Group 2 Pulmonary Hypertension in patients with Heart Failure with preserved Ejection Fraction (HFpEF), which impacts more than 600,000 people in the United States. Preliminary data from the phase 1a study in healthy volunteers has demonstrated PK/PD effects for TX-45 that are consistent with a potential best-in-class profile for TX45 and monthly dosing. Phase 1b hemodynamic proof of concept data is expected in 2025 and phase 2 randomized data is expected in 2026.

The company’s second program addresses hereditary hemorrhagic telangiectasia (HHT), a rare, autosomal dominant disease that causes abnormal blood vessel formation. HHT affects approximately 75,000 patients in the U.S. The target population for development is the 10-20 percent of patients that are considered to have severe disease because of frequent bleeding, anemia, and in some cases, the need for frequent blood transfusions. Tectonic plans to initiate human studies in this program during the Q4 2025 to Q1 2026 timeframe.

Tectonic’s third program is focused on fibrosis, using a bispecific approach to inhibit two different receptors with complementary / non-overlapping modes of action.

In connection with the merger, Tectonic has raised or entered into agreements for a $130.7 million private placement with a syndicate of new and existing leading life sciences investors. The combined company is expected to have approximately $165 million of cash and cash equivalents at closing, inclusive of the proceeds to be received in the private placement. These proceeds will be used to advance Tectonic’s pipeline through multiple clinical data catalysts and are expected to fund the combined company’s operations into mid-2027. The private placement is expected to close in conjunction with the merger in the second quarter of 2024.

Pre-merger Avrobio shareholders are expected to own approximately 22.3 percent of the combined company and pre-merger Tectonic shareholders are expected to own approximately 40.2 percent of the combined company, with the private placement investors owning the remaining 37.5 percent. The percentage of the combined company that Avrobio shareholders will own at the close of the transaction is subject to adjustment based on Avrobio net cash at the closing date, which is currently estimated to be approximately $65 million. Immediately prior to the closing, Avrobio shareholders will be issued contingent value rights representing the right to receive certain payments from proceeds received by the combined company, if any, related to certain pre-transaction assets of Avrobio.

The Merger has been approved by the Board of Directors of both companies and is expected to close in the second quarter of 2024 subject to customary closing conditions, including the approvals by the shareholders of each company, the closing of the private placement financing and other customary closing conditions.

Photo: Erik Ostrowski, interim CEO and chief financial officer of Avrobio

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