Homology Medicines has found a source of fresh funding. With its share price in the doldrums and its cash runway nearing its final year, Homology is offloading manufacturing assets through a joint venture to raise $130 million for clinical development of gene therapies.
The deal will see Homology and U.K.-based lentiviral specialist Oxford Biomedica create a joint venture focused on adeno-associated virus (AAV) vectors. Homology is contributing its AAV process development and manufacturing platform, intellectual property, Boston plant and employees including Chief Operating Officer Tim Kelly. Oxford Biomedica is paying $130 million for an 80% stake in the new company.
“The $130 million cash infusion, coupled with the reduction in operating expenses, significantly extends our runway and supports the continued advancement of our programs and genetic medicines platform,” Homology CEO Arthur Tzianabos, Ph.D., said in a statement.
Homology ended September with $187.6 million. Based on its projected burn rate, Homology calculated the money would fund its operations into the first quarter of 2023. Homology’s ability to raise money on public markets is limited by its share price, which has fallen 76% over the past year to below $4. Novartis walked away from a collaboration with Homology around 11 months ago.
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Phase 2 data on Homology’s lead gene therapy in adult phenylketonuria are due around the middle of the year, meaning the biotech would have had a chance to improve its share price before reaching the end of its cash runway. But with the Oxford Biomedica deal Homology has found a way to raise cash and extend its runway without offering stock.
The deal will leave Homology reliant on the joint venture, Oxford Biomedica Solutions, for manufacturing services. Homology, which will own 20% of the venture, has a “multi-year supply agreement as a preferred customer with minimum contracted revenue of approximately $25 million” for the first year.
After the three-year anniversary of the closing of the deal, either party can trigger the sale of Homology’s 20% stake. The deal values the stake at 5.5 times Oxford Biomedica Solutions’ revenue for the previous 12 months. The most Homology can receive for the stake is $74.1 million.