Avrobio’s road ends in reverse merger with Tim Springer-backed startup

31 Jan 2024
www.biopharmadive.com
AcquisitionGene TherapyIPO
Dive Brief:
The gene therapy company Avrobio agreed to a reverse merger with startup Tectonic Therapeutic after years of struggling with clinical setbacks and a tough financing market for the biotechnology industry.
Avrobio investors will likely end up with about 22% of the combined company, while pre-merger Tectonic stockholders will own about 40%, according to an announcement Tuesday. In tandem with the deal, Tectonic is raising about $131 million from new and existing investors in a private placement.
The new entity will operate under Tectonic’s name and be led by the startup’s CEO Alise Reicin and her management team. One director from Avrobio will join the board of the combined company, which will be based in Watertown, Massachusetts and is expected to trade on the Nasdaq under the symbol TECX.
Dive Insight:
The transaction gives Tectonic a path to go public while salvaging some value for Avrobio stockholders, who have seen the value of their shares drop to just over $1 from $19 at the time of the company’s 2018 initial public offering.
After stopping work on one of its most advanced gene therapies in 2022 and selling off another experimental therapy to Novartis in 2023, Avrobio in July said it would discontinue further development of medicines, slash its workforce in half and explore strategic alternatives. The merger with Tectonic was the best option for shareholders, Avrobio interim CEO Erik Ostrowski said in the companies’ statement.
The new company expects to have about $165 million in cash, enough to fund operations into mid-2027 and advance Tectonic’s pipeline. Tectonic’s three leading programs are designed to treat a type of hypertension in heart failure patients, a disease that causes abnormal blood vessel formation and fibrosis.
Tectonic focuses on G protein-coupled receptors, or GPCRs, which handle critical signals for cells. Drugs aimed at GPCRs make up about a third of all medicines approved by the Food and Drug Administration, but only a small number of GPCRs have been targeted to date. Tectonic says its technology allows biologics to work on GPCRs that can’t be reached with traditional small molecules.
Tectonic was co-founded by Harvard Medical School’s Andrew Kruse and Tim Springer, a leading research scientist and biotech founder who’s seen previous success with companies including Moderna.
The companies expect the private placement and merger to close together in the second quarter. The share of the combined company held by Avrobio stockholders may be adjusted based on the company’s net cash at closing.
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