USA — Novartis, a leading pharmaceutical company, has made a unique acquisition by purchasing a gene therapy candidate from Avrobio, a biotech company facing financial constraints.

In this deal, Novartis will pay US$87.5 million upfront without committing to any future milestones or royalties for the clinical-phase asset. This announcement follows previous reports of Novartis considering a takeover of Avrobio.

The terms of the deal reflect the immediate financial pressures faced by Avrobio. The Massachusetts-based biotech had US$72.3 million in cash reserves as of March, which it estimated would sustain its operations until the first quarter of next year.

However, with its stock trading below US$1 in recent months, Avrobio’s ability to raise additional funds from investors has been limited.

Thus, the company identified the Novartis deal as a means to bolster its financial position while streamlining its pipeline.

The agreement, announced by Avrobio on Monday, will provide Novartis with a treatment for cystinosis, a rare genetic condition characterized by the toxic accumulation of the amino acid cystine.

Additionally, Novartis will receive an exclusive license to other assets and intellectual property related to the experimental drug from Avrobio.

The cash infusion from Novartis will significantly extend Avrobio’s financial runway, enabling it to continue operations until the fourth quarter of next year.

This flexibility is valuable in a challenging market environment, especially for smaller biotechnology companies like Avrobio that are generating losses.

As part of the deal, Avrobio has granted Novartis an exclusive license to certain intellectual property and has agreed not to assert claims against the Swiss drugmaker for specific IP violations.

However, these claims exclusion does not cover violations related to Gaucher disease, Pompe disease, Hunter syndrome, and Fabry disease, which are areas of current or past focus for Avrobio.

For Novartis, this acquisition expands its pipeline of gene therapies, which already includes marketed treatments such as Zolgensma and Luxturna.

The Swiss pharmaceutical company has recently been strengthening its presence in the field through partnerships with Voyager Therapeutics and Gyroscope Therapeutics.

By divesting the cystinosis treatment, Avrobio can refocus its efforts on other clinical-stage gene therapies targeting lysosomal storage disorders, such as Gaucher and Hunter syndromes. The company also has a preclinical research program dedicated to Pompe disease.

Erik Ostrowski, Avrobio’s CFO and interim CEO, stated, “This transaction strengthens Avrobio’s balance sheet, focuses our pipeline strategy, and is a strong endorsement of our hematopoietic stem cell gene therapy approach and plato gene therapy platform.”

Ostrowski assumed the role of interim CEO in May after Geoff Mackay, Avrobio’s founder and long-time chief executive, stepped down to join an emerging early-stage company.

This leadership transition occurred a little over a year after Avrobio decided to discontinue the development of gene therapy for Fabry disease due to disappointing clinical trial results.

The cystinosis treatment being acquired by Novartis is currently undergoing Phase 1/2 testing and recently released data that shows promising indications of its intended efficacy.

The deal between Novartis and Avrobio has prompted speculation about why Novartis chose to acquire a single program for US$87.5 million instead of pursuing a complete acquisition of Avrobio.

Prior to the Novartis deal, Avrobio had a market capitalization of US$34 million. Even with a 100% premium, acquiring the entire company would have been a more cost-effective option compared to the single-asset deal.

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