Shares of Avrobio (NASDAQ:AVRO) jumped nearly 20% today after the company announced the pricing of a public stock offering. The gene therapy developer previously told investors it was looking to raise $100 million in gross proceeds, or up to $115 million if the customary 15% additional allotment of shares was gobbled up.
But demand was higher than expected. That allowed Avrobio to haul in $120.25 million in gross proceeds from the public offering at $18.50 per share -- and that doesn't include a single share from the additional allotment. That means the business could rake in up to $138.3 million in gross proceeds when the dust settles, which is 20% more than the originally expected maximum.
Investors are happier about that than the accompanying dilution. As of 11:05 a.m. EDT, the stock had settled to a 17.1% gain.
Avrobio is an early-stage gene therapy developer taking aim at lysosomal storage diseases, which are caused by simple genetic mutations (making them an ideal candidate for one-and-done genetic medicines) that drive imbalances in how cells store and remove waste products. The company's lead drug candidate, AVR-RD-01, is currently being investigated as a treatment for Fabry disease in a phase 1/2 clinical trial. The drug candidate attempts to restore the function of an enzyme that helps cells properly store and remove waste products, thereby avoiding complications such as progressive kidney damage.
Interim results announced a few days ago show that AVR-RD-01 might live up to its promise. The first patient evaluated one year after treatment in the phase 2 trial achieved an 87% reduction in the average number of Gb3 inclusions (the protein that builds up and causes Fabry disease) in a kidney biopsy sample, and an 87% reduction in Gb3 detected in the blood. The former metric is the primary endpoint for the mid-stage study.
By comparison, four patients from the phase 1 trial have achieved reduced blood levels of Gb3 between 33% and 41% for as long as two years post-treatment. The reasons for the differences between trials weren't immediately clear from the press release, but they could simply be due to differences in doses. Either way, Avrobio believes the sharp reduction in Gb3 levels in the first patient in the phase 2 trial is clinically relevant.
Avrobio wisely took advantage of its solid interim phase 2 data readout (albeit from one patient) from a few days ago to pad its balance sheet. While the business exited March with $108 million in cash, the early-stage drug developer still needs to complete clinical trials and, most importantly, begin to think about commercial-scale gene therapy manufacturing activities. The latter can require over $100 million in upfront investment in the first few years. For now, at least, the business is on the right track, but investors shouldn't forget that there's a long way to go.