Omega Therapeutics has almost reached the end. With cash running low, the Novo Nordisk-partnered biotech has struck a deal with its founder Flagship Pioneering that could see it file for bankruptcy and lay off up to 17 people.
Massachusetts-based Omega struck an obesity drug development deal with Novo at the start of 2024, setting it up to reel in as much as $532 million from the Danish drugmaker. Money remained tight, though. The biotech laid off 35% of its employees in March to extend its cash runway into early 2025. In November, Omega stopped work on its clinical asset and warned it could only keep going into the second quarter.
Flagship, the investor that founded Omega and remains its biggest shareholder, has offered the biotech a way out of the predicament. The restructuring support agreement gives Omega a bridge loan and sets a timeline for filing for bankruptcy.
Omega must negotiate a stalking horse agreement with Flagship’s Pioneering Medicines, setting the floor price for the sale of the biotech’s assets during bankruptcy proceedings. The biotech will file for Chapter 11 bankruptcy by Feb. 10. The arrangement gives Omega the cash to keep going for a little while longer and provides a path for selling its assets.
The biotech is slimming down to reduce spending as it limps toward the exit. Omega plans to lay off up to 17 people, effective immediately. The biotech ended 2023 with 93 full-time employees but reduced its head count by 35% in March. While Omega is shedding staff, it has agreed to pay its CEO and finance chief bonuses to keep them at the company until at least the end of June.
Omega disclosed the changes in a financial regulatory filing that makes no reference to its partnership with Novo. The deal is worth up to $532 million but did little to ease Omega’s money worries in the near term. Omega received $5.1 million upfront early in 2024 and expects to pocket around $21.6 million in cost reimbursement through 2027.