Seeking A Fresh Start in Gene Therapy, Avalanche Merges With Annapurna

Xconomy San Francisco — 

Avalanche Biotechnologies went public during a renaissance for gene therapy, but it’s been searching for a way forward ever since a disappointing trial led to an executive overhaul. The Menlo Park, CA, company has turned to a privately held startup with roots at Weill Cornell Medical College to turn things around.

This morning, Avalanche (NASDAQ: AAVL) announced a deal to merge with Annapurna Therapeutics, a startup once known as AAVLife that is developing gene therapies for a group of rare diseases. In the deal, Avalanche is using 17.6 million of its shares to acquire all the stock of Annapurna. Following the buyout, Avalanche’s stockholders will own 62.5 percent of the combined company, with Annapurna’s backers holding the remaining 37.5 percent.

Avalanche CEO Paul Cleveland will remain the head of the new company, while Annapurna CEO Amber Salzman (pictured)—who played a key role in gene therapy’s rebirth several years ago—will serve as president and chief operating officer. In addition, Annapurna co-founder Ronald Crystal, a gene therapy specialist and genetics professor at Weill Cornell in New York, will become a scientific adviser. Avalanche will stay based in the San Francisco Bay Area.

The deal gives Avalanche—which had been focusing on gene therapies for eye diseases—four gene therapy programs in a variety of rare disorders. These diseases include Friedreich’s ataxia, Alpha1-antitrypsin deficiency, and hereditary angioedema. Annapurna just licensed some of these programs in January from Crystal’s lab at Weill Cornell. Avalanche isn’t done, either. Cleveland said in a statement that the company wants to add more programs “through additional licenses and acquisitions.”

Salzman, reached via e-mail, says Annapurna evaluated several options and found the Avalanche merger a “good strategic fit” given it has the infrastructure and resources to move Annapurna’s programs forward (the Alpha1 program will be in clinical testing this year, she says). “We could have also gone the private investment route and considered an IPO at a much later date when market conditions were different,” she says.

Salzman adds that the company will be renamed in the coming months.

The deal marks a restart for Avalanche, which raised $102 million in an IPO in July 2014 and saw its shares trade as high as about $60 apiece in January 2015. They’re now worth just 10 percent of that, closing last Friday at $6 apiece. In June a Phase 2a trial for Avalanche’s potential treatment for so-called wet age-related macular degeneration, a common cause of vision loss, produced disappointing results. Shares plummeted, CEO Thomas Chalberg resigned, and Avalanche sent the program back into preclinical testing. That left Avalanche with a lot of cash—it had $258 million at the end of the year, good for a 36-month runway—but no programs in human trials.

Salzman could be in a unique position to help turn Avalanche around. When she was an R&D executive at GlaxoSmithKline some 14 years ago, her nephew and one-year-old son were diagnosed with a crippling genetic brain disorder called x-linked adrenoleukodystrophy. She helped form the Stop ALD Foundation, began collaborating with a pediatric neurology specialist named Patrick Aubourg in France, and helped advance what later became a successful gene therapy procedure that Aubourg helped perform on two boys with ALD. That study was published in Science, and Third Rock Ventures and Genzyme took the work forward in the form of Bluebird Bio (NASDAQ: BLUE), one of the symbols of gene therapy’s renaissance (and, more recently, its current limitations).

Salzman and Aubourg teamed up again to form AAVLife in January 2014. Aubourg had been looking into treatments for other rare neurological disorders such as Friedreich’s ataxia, and enlisted Salzman’s help. She brought together a coalition of researchers and gene therapy experts in New York and France, and the result was AAVLife—named partly after the adeno-associated virus, which the company was using as a vector to deliver its gene therapy treatments. Avalanche also uses AAV vectors for its programs.

“Our businesses are highly complementary, and this transaction enables us to combine the best assets of both companies as we drive toward the development of new gene therapies in multiple disease areas, including rare diseases,” Salzman said of the deal in a statement. “This transaction provides the capabilities required to bring promising treatments to clinical practice.”

Annapurna’s investors include Versant Ventures as the Inserm Transfert Initiative, a venture arm of the French Institute of Health and Medical Research. The company raised a $12 million Series A in 2014. “Our investors see this transaction as a great long-term opportunity to transform into the leading gene therapy company,” Salzman wrote via e-mail to Xconomy.

Annapurna chief medical officer Carlo Russo will take on the same role at the combined company, while Avalanche’s interim chief scientific officer Mehdi Gasmi has been named chief technology officer. MPM Capital, which co-founded Avalanche, named managing director Mitchell Finer to the company’s board of directors. Three other new board members have been named as well: Salzman, Venrock partner Bong Koh, and Versant managing director Thomas Woiwode.

The company is holding a conference call this morning to discuss the deal. Avalanche’s shareholders have to approve the merger—the company expects to close the deal in the second quarter.