Applied Genetic Technologies Corp. is being taken private by healthcare company creator Syncona in a transaction that will keep the struggling gene therapy developer from running out of cash next year.
Syncona will pay $0.34 per share, or about $23.5 million, for rights to the company, which is commonly known as AGTC. The deal could include an additional $50 million in payments, or as much as $0.73 per share. Still, those payouts would come via contingent value rights, which will only materialize if AGTC’s lead program for an inherited type of vision loss hits certain development milestones, the companies said on Monday.
The guaranteed part of the offer represents a 42% premium to AGTC’s closing price on Friday, while the entire deal, including the CVR, would increase the premium paid to 344%. The companies expect the deal to close in the fourth quarter.
At the closing price of $0.24 per share on Friday, AGTC’s stock has lost about 90% of its value this year and is trading at record lows.
The company is one of many gene therapy developers that have seen their market value plunge during a sector-wide downturn this year. Some retrenched early on in response to a difficult financing environment, paring back on spending or cutting jobs.
The challenging market also has led some companies to sell themselves at a discount. This month, two genetic medicine developers trading at or near record lows — Akouos and LogicBio — agreed to buyouts from large drugmakers.
AGTC now is on that list. In a statement, Chairman Scott Koenig cited the “state of equity and other funding markets” for the “significant challenges in funding ongoing operations beyond 2022.” The company had about $46 million in cash at the end of June and has warned in regulatory filings that it may not remain solvent without a transaction. The company already paused development of one gene therapy because of financial constraints.
“Raising additional funds in the current capital markets environment for biotechnology companies is not a viable option,” CEO Sue Washer said on a conference call explaining the deal’s rationale.
The transaction will give AGTC a chance to continue developing a gene therapy for X-linked retinitis pigmentosa that’s currently in advanced testing.
The disease, which mainly affects boys and causes progressive vision loss, has been a popular target among gene therapy makers. AGTC’s program, AGTC-501, is one of at least two in late-stage clinical development, along with one from MeiraGTx and Johnson & Johnson. AGTC disclosed positive data from an early-stage study in May and expects interim results from a Phase 2/3 trial known as Vista in the first half of next year.
“With knowing the full details, [the] acquisition by Syncona probably makes sense at this juncture,” Stifel analyst Dae Gon Ha wrote in a research note.
Syncona has experience with eye gene therapies, having been a founding investor of two gene therapy developers, Nightstar Therapeutics and Gyroscope Therapeutics, that were acquired in recent years. Nightstar was bought by Biogen, in part for an XLRP gene therapy that later failed in clinical testing.
“We believe AGTC-501 has the potential to be a best-in-class product” and Syncona has the “domain expertise and track record” to get it through clinical development, Syncona Chief Investment Officer Chris Hollowood said on the call.
AGTC went public in 2014 at $12 per share and its stock peaked at over $30 shortly thereafter. Biogen once had rights to its XLRP treatment through a 2015 partnership, but cut ties with AGTC after a different program, for a rare eye disorder called X-linked retinal sclerosis, failed an early-stage trial in 2018.