Rocket gives a gene therapy SPAC a lifeline with buyout deal

Dive Brief:

  • Rocket Pharmaceuticals has agreed to acquire fellow gene therapy developer Renovacor in an all-stock deal that broadens the company’s portfolio of gene-based medicines for heart disease. 
  • Per deal terms, Renovacor stockholders will get about 0.1676 Rocket shares for each share they own of the Philadelphia-based biotech, equal to a roughly 4.6% stake in Rocket. The offer values Renovacor’s equity at $2.60 per share, or roughly $53 million, and is expected to close in the first quarter of next year if stockholders support the deal.
  • The transaction gives Rocket an experimental treatment for a severe, genetic form of heart failure known as BAG3-associated dilated cardiomyopathy. For Renovacor, it provides an exit for investors who have seen shares fall more than 80% since the company’s public market debut last year. 

Dive Insight:

Like many of their peers, Rocket and Renovacor have seen their share values plummet during a sector-wide correction that has hit gene therapy developers particularly hard. 

Rocket shares, for instance, have lost about 78% of their value since biotech’s most recent public market peak last February. Renovacor’s stock, meanwhile, has fallen to less than $2 per share since it announced plans to merge with a special purpose acquisition company, or SPAC, formed by Chardan Capital Markets at $10 per share in March 2021. 

Rocket is better positioned to withstand the downturn, however. With a roughly $1 billion valuation, the company remains worth more than established gene therapy players like Bluebird Bio and UniQure, and prior to the acquisition, had a cash runway extending into 2024. It also has two prospective rare disease treatments that could be submitted to regulators next year and a third that’s shown promise in clinical testing for a genetic heart condition known as Danon disease.

Rocket may look to sell special regulatory vouchers awarded by the Food and Drug Administration if its gene therapies are approved, adding to its cash reserves. 

Renovacor, by comparison, has yet to start its first trial and had $62 million in the bank at the end of June, enough to get to the fourth quarter of 2023. A prospective equity raise would have been harder to pull off, too, with shares trading near all-time lows. 

The buyout, then, gives Renovacor a financial lifeline and its shareholders a chance to bet on the combined company’s future, while handing Rocket more ways to treat heart disease with gene therapy. 

The announcement forms “what we believe will be the creation of the world’s leading cardiac gene therapy company,” Rocket CEO Gaurav Shah said on a conference call with analysts. 

Shah said the potential market for Renovacor’s lead treatment targets is “comparable” to Danon, which is currently Rocket’s largest commercial opportunity. Dilated cardiomyopathy is the most common form of the heart muscle disease. An estimated 30,000 of the U.S. patients currently diagnosed with it have mutations to the BAG3 gene, and that figure is expected to grow with increased awareness and genetic testing, according to Rocket. There are no approved therapies for genetic mutations that lead to dilated cardiomyopathy.  

Like Rocket’s Danon program, Renovacor’s gene therapy uses the same viral delivery tool, known as AAV9, to deliver its treatment and is meant to restore cardiac function. Rocket expects to begin clinical testing next year. 

RTW Investments, a major shareholder of both Rocket and Renovacor, has agreed to vote in favor of the deal, the companies said in a statement. 

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