Avalanche Bio Rolls Onto Nasdaq After Upsized, $102M IPO

Xconomy San Francisco — 

Regeneron Pharmaceuticals placed a bet on Avalanche Biotechnologies earlier this year with a wide-ranging partnership. Now, it appears public investors are jumping on the Menlo Park, CA-based company’s bandwagon too.

Avalanche, which is developing gene therapies for severe eye diseases, has raised a whopping $102 million in its IPO by pricing 6 million shares at $17 apiece. Avalanche upsized the offering from the 5.4 million shares it initially planned to sell, and priced atop its $16 to $17 per share range—which had already been boosted on Wednesday from an earlier $13 to $15 projection. Development partner and shareholder Regeneron (NASDAQ: REGN) has also agreed to buy $10 million worth of Avalanche stock at the IPO price in a concurrent private placement, which will boost the company’s total haul.

The company will debut on the Nasdaq this morning under the ticker symbol “AAVL.”

Avalanche was formed in 2006 around the concept of using gene therapy to correct severe eye diseases, potentially in a single treatment. The company’s lead candidate is AVA-101, a prospective gene therapy it’s testing as a treatment for the wet form of age-related macular degeneration (AMD) and diabetic macular edema, among other diseases.

Wet AMD, of course, has become the focus of a huge amount of R&D spending, and dealmaking, in pharma and biotech, and it’s typically treated with one of a group of drugs that block a molecule called vascular endothelial growth factor (VEGF) that researchers believe causes the condition to worsen. Those drugs, like bevacizumab (Avastin), ranibizumab (Lucentis), and aflibercept (Eylea), are injected directly into the eye—the main difference between the three is how often. Combined, the three drugs accounted for more than $6 billion in sales in 2013.

Avalanche’s big sell is the idea that it could supply a one-time gene therapy correction for wet AMD. Specifically, a single treatment with AVA-101 is supposed to enable retinal cells to “continuously” produce, on their own, a naturally-occurring anti-VEGF protein, according to the IPO prospectus.

The question is whether Avalanche can prove it, and just as importantly, whether the procedure is safe. Gene therapy has seen more of its share of ups and downs since the idea of using viruses to ship healthy genes into cells to replace faulty or missing ones first came onto the scene 20 or so years ago. To this day, there’s only one approved gene therapy in the world—sold by UniQure—and it’s only sold in Europe.

But there’s been a lot of momentum in the field over the past few years, spurred on by more advanced delivery technologies, and small, yet encouraging samples of human clinical data. Avalanche—which, like many other gene therapy companies, uses adeno-associated viruses (AAV) to deliver its treatments—is one of the companies benefiting from its renaissance.

The early signs for Avalanche’s treatment were positive enough to move it forward. The company completed a Phase 1 trial in Australia of eight wet AMD patients, and AVA-101 helped improve their visual acuity (clearness of vision) over the course of the year-long study—as measured by an improvement in the amount of letters they could read on an eye chart—without them needing rescue therapy or experiencing severe drug-related side effects. The ongoing Phase 2a trial includes 32 patients, and is expected to produce data in mid-2015.

There’s a long way to go, but clearly investors and at least one big industry player believe Avalanche can succeed. In April, Avalanche raised a $55 million Series B round led by Venrock and several other investors. Two weeks later, it cut a more than $640 million deal with Regeneron to develop and commercialize gene therapies for eye diseases. The deal includes eight total therapeutic targets. Regeneron could get worldwide rights to all of them, though Avalanche has the option to share up to 35 percent of the costs and profits of products aimed at two therapeutic targets of its choice.

Regeneron held 8.2 percent of Avalanche before the IPO, and while Avalanche still owns full rights to AVA-101, Regeneron can negotiate for rights to the therapy after Avalanche completes a Phase 2a study.

Avalanche will use the much of the IPO cash to fund the studies for AVA-101 and one of its other therapies, AVA-201, a preventative gene therapy for wet AMD that has yet to begin clinical trials. The company is also developing a gene therapy for a rare retinal disease called X-linked retinoschisis (AVA-311), which has no approved treatment. Avalanche is developing AVA-311 as part of its deal with Regeneron.

Thomas Chalberg, a former Genentech executive who helped launch and commercialize ranibizumab, is Avalanche’s CEO.

Zygtech held 17.4 percent of Avalanche’s shares before the IPO. Venrock (13.4 percent), FMR LLC (9 percent), and Deerfield (5.9 percent) also own big stakes, along with Regeneron. The company has raised more than $60 million in venture dollars since its inception.

Jefferies, Cowen and Co., Piper Jaffray, and William Blair are underwriting the IPO.