Homology enters reverse merger with Q32 Bio

Dive Brief:

  • Gene editing company Homology Medicines said Thursday it has agreed to a definitive merger with Q32 Bio in an all-stock transaction that will combine the two biotechnology companies.
  • The company will operate under the Q32 Bio name, be based in Waltham, Massachusetts, and be led will by Q32’s leadership team. It will also trade on the Nasdaq, with the ticker symbol “QTTB.” Upon closing, Q32’s combined cash balance will be approximately $115 million, and the company is expected to have a financial runway into 2026.
  • Q32 also entered an agreement for a $42 million private placement investment with new and existing investors. The combined company and investment will focus on development of Q32’s autoimmune and inflammatory disease candidates.

Dive Insight:

Founded in 2015, Homology raised $144 million in an initial public offering three years later, with the goal of using the funds to develop a gene therapy for phenylketonuria, or PKU. People with the disease cannot break down the amino acid phenylalanine, which builds up in their blood and leads to progressively worse neurological issues.

But Homology has struggled to bring such treatment to fruition, as the Food and Drug Administration put a hold on the program due to potential signs of liver risks. Since its IPO, the biotech has seen its shares lose most of their value.

This summer, Homology announced plans to reduce its headcount by 87% to extend operations into 2026. The company also said it was looking at a merger or other financial deal to keep itself afloat.

Homology then pivoted to a gene editing treatment for PKU. Early data analyzing the treatment in three people showed a reduction of phenylalanine levels in two participants. No serious safety events were reported. Despite the promising data, Homology decided to stop the stop the program due to what it described as a “tough financing environment.”

The newly announced merger gives Q32 a path to the public markets during a tenuous time for biotech IPOs. Under terms of the deal, the new company will continue developing the latter’s experimental antibody drug bempikibart, or ADX-914, which in Phase 2 testing for the treatment of atopic dermatitis and alopecia areata. Another Q32 program, called ADX-097, is meant to target part of the body’s immune response known as the complement system. That drug recently completed a Phase 1 study.

Q32 said both candidates will have data readouts by the end of 2024, with topline results for ADX-097 expected in the second half of 2025.

Shareholders of Homology will own approximately 25% of the combined company, and will receive a contingent value right to receive payment from the sale of any legacy Homology assets.