Novartis to buy Avrobio gene therapy for $88M, leaving rest of the biotech on the shelf

Novartis is buying a gene therapy candidate from the cash-constrained Avrobio, striking an unusual deal that will see the Big Pharma pay $87.5 million without committing milestones or royalties to land the clinical-phase asset. The news comes months after Novartis was reported to be lining up a takeover of the biotech.

The deal covers AVR-RD-04, an investigational hematopoietic stem cell gene therapy program for the treatment of the rare genetic condition cystinosis. In February, data from a phase 1/2 trial sponsored by the University of California, San Diego revealed the first five patients had stopped taking oral cysteamine, the drug used to tackle the buildup of cystine crystals that drives cystinosis, after receiving the therapy.

Based on the data, Avrobio was gearing up to start a registration-enabling phase 1/2 study in the second half of the year. However, the biotech has changed its plans, choosing to sell the candidate to Novartis for an all-in price of $87.5 million. However successful the therapy is, that sum is all Avrobio will receive.

The terms reflect the near-term pressures on Avrobio. The Massachusetts-based biotech ended March with $72.3 million, a sum it forecast would keep it going into the first quarter of next year. With its stock trading below $1 in recent months, the biotech’s ability to raise more money from investors is limited, leading it to identify the Novartis deal as a way to boost its bank balance while narrowing its pipeline. 

Once the $87.5 million lands in its bank, Avrobio estimates it will have the money to fund operations into the fourth quarter of next year. A global registrational phase 2/3 clinical trial of Gaucher disease therapy AVR-RD-02 is scheduled to start in the second half of this year, although, with putting the primary completion date at late 2027, even the extended runway may be too short.

As part of the deal, Avrobio has granted Novartis an exclusive license to use certain intellectual property and agreed not to assert claims against the Swiss drugmaker for certain IP violations. The agreement not to assert claims excludes violations related to Gaucher disease, Pompe disease, Hunter syndrome and Fabry disease, areas of current or past focus for Avrobio.

One question raised by the deal is why Novartis opted to snag one program for $87.5 million rather than buy Avrobio outright. With Avrobio’s market cap sitting at $34 million before news of the Novartis deal, a buyout with a 100% premium would have cost less than the single-asset deal, and even a 500% premium would represent a small outlay for the Swiss drugmaker.