Eli Lilly has agreed to acquire Akouos for up to $610 million, the companies said today, in a deal intended to expand the buyer’s presence in gene therapy with a focus on treating inner ear disorders.

Boston-based Akouos develops targeted adeno-associated viral (AAV) vector-based gene therapies for conditions that include sensorineural hearing loss, integrating expertise in otology and inner ear drug delivery, as well as gene therapy.

Akouos’ preclinical pipeline is led by AK-OTOF, a gene therapy designed to treat hearing loss due to mutations in the otoferlin gene (OTOF). On September 13, AK-OTOF received an Investigational New Drug (IND) clearance, with a Phase I/II trial in the works but not yet initiated. Lilly is expected to deliver an update by year’s end on the start of that study, which will evaluate AK-OTOF’s safety/tolerability through dose escalation, and its efficacy through auditory brainstem response (ABR).

Akouos isn’t the only gene therapy developer looking to launch a first clinical trial for one of its products. Just yesterday, Decibel Therapeutics received FDA clearance for its IND application to begin a Phase I/II trial in pediatric patients of DB-OTO, its lead gene therapy product candidate which is being developed in collaboration with Regeneron Pharmaceuticals. DB-OTO is an AAV-based, dual-vector gene therapy candidate designed to provide durable hearing in individuals born with profound congenital hearing loss due to an otoferlin deficiency.

Additional pipeline programs include AK-CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision; GJB2 (which encodes connexin 26) for a common form of monogenic deafness and hearing loss; and AK-antiVEGF for the treatment of vestibular schwannoma.

Akouos was established in 2016 by founders that included the company’s president and CEO Emmanuel Simons. He studied music as an undergraduate at Harvard College, a passion that strengthened his appreciation for hearing. He shifted to neuroscience after choosing to study biomedical engineering at the Massachusetts Institute of Technology (MIT), where he focused on inner ear drug delivery in the laboratory of Robert S. Langer, ScD.

Simons earned his doctorate in 2008, and six years later joined Voyager Therapeutics before co-founding Akouos with Michael J. McKenna, MD, William F. Sewell, PhD, Richard H. Smith, MD, and Luk H. Vandenberghe, PhD.

Vandenberghe—the director of the Grousbeck Gene Therapy Center at Massachusetts Eye and Ear—built an ancestral AAV capsid library by using the capsid sequence of all known naturally occurring AAV capsids and computationally predicting their ancestors. He developed a synthetic AAV vector that could enable safe and efficient gene transfer to the mammalian inner ear—a discovery detailed in Nature Biotechnology in 2017.

Vandenberghe showed that an AAV vector, Anc80, has a high transduction efficiency for the hair cells in the inner ear. Akouos licensed the entire library (38,000 distinct capsids) for all inner ear uses. Marrying together Vandenberghe’s Anc80 with the surgical delivery method for the inner ear meant that the company was on its way.

Coming together “nicely”

Speaking with GEN earlier this year, Simons said that these factors “came together nicely to open up a new field of medicine.”

AAV gene therapies, he added, are “ideally suited to the inner ear.” The AAV vectors can be delivered directly without exposure to the rest of the body, allowing a high ratio of vector to contact the target cells. Also, the hair cells don’t divide, which means the expression of functional genes may be sustained over the long term.

In March, a research team published a study in Nature Communications showing that an AAV, Anc80L65, can deliver genes into the inner ear of rhesus macaques when combined with a novel surgical approach consisting of a transmastoid posterior tympanotomy. At the time, Michael McKenna, MD, Akouos’ co-founder and chief medical officer, said the study paved the way for translation of the approach into gene therapy development for human hearing disorders.

“We believe that with Lilly’s resources, global reach, and growing capabilities in gene therapy, we can help Akouos fulfill their mission of making healthy hearing available to all,” Andrew C. Adams, PhD, senior vice president of genetic medicine and co-director of Lilly’s Institute for Genetic Medicine, said in a statement.

Lilly launched the $700 million Institute in February in Boston’s Fort Point section as part of its strategy to advance gene therapies, RNA- and other nucleic acid-based therapeutics, and other genetic medicines. At the time, Lilly noted that genetic medicines accounted for more than 20% of Lilly’s diabetes, immunology, and central nervous system research portfolio—a percentage the company aimed to increase through the Institute.

The Institute operates in Boston and New York City, where Lilly-owned Prevail Therapeutics is based. Lilly expanded into gene therapies by acquiring Prevail and its portfolio of neuroscience programs for up to $1.04 billion, in a deal completed in January 2021. Prevail’s lead pipeline candidate, LY3884961 (formerly PR001) is an AAV-based therapy for patients with Parkinson’s disease with GBA1 mutations (PD-GBA) and neuronopathic Gaucher disease (nGD)

Before and since acquiring Prevail, Lilly has bolstered its genetic medicine portfolio through efforts that include:

  • An up-to-$3.7 billion collaboration launched in 2018 with Dicerna Pharmaceuticals to develop RNA interference (RNAi) therapies for reduction in Apo(a) protein.
  • A collaboration with MiNA Therapeutics in which Lilly committed up to $1.25 billion (including $25 million upfront) toward partnering with U.K.-based MiNA Therapeutics to develop small activating RNA (saRNA) drugs for up to five undisclosed targets across Lilly’s key therapeutic areas of cancer, diabetes, immunology, neurodegenerative diseases, and pain.
  • An up-to-$1.3 billion partnership (including $20 million upfront and a $30 million equity investment) launched in 2021 with ProQR to apply its Axiomer RNA base editing technology toward developing editing oligonucleotides directed to up to five targets, also undisclosed.

Complementary deal, $487M upfront

“We see this acquisition by LLY as complementary to a growing pipeline of genetic medicines,” David Risinger, CFA, Head of Diversified Biopharmaceutical Research and a senior managing director with SVB Securities, wrote in a research note.

Lilly agreed to pay Akouos $487 million upfront or $12.50 a share—plus a non-tradeable contingent value right (CVR) per share that entitles the holder to receive up to an additional $3.00 cash per share.

CVR holders would be entitled to receive:

  • $1 cash, upon the fifth participant being administered with AK-OTOF in a Phase I or Phase I/II trial on or before December 31, 2024.
  • $1 cash, upon the fifth participant being administered with an Akouos gene therapy product for a second monogenic form of sensorineural hearing loss (excluding AK-OTOF and AK-antiVEGF) on or before December 31, 2026;
  • $1 cash, upon either the first participant being administered with an Akouos gene therapy product (excluding AK-antiVEGF) for a monogenic form of sensorineural hearing loss in a Phase III trial—or upon FDA approval for that product, whichever occurs first, on or before December 31, 2026. After that date, the value of that CVR will shrink by approximately 4.2 cents per month until December 1, 2028, when the CVR expires.

The $12.50 share price not counting the CVR reflects a 78% premium over Akouos’ closing price Monday of $7.01, while the premium for the maximum $15.50 per share price would be 121%. Those prices are five to nearly seven times Akouos’ 52-week low of $2.32 on May 25.

Investors roared their approval of the Lilly acquisition with a buying surge that sent Akouos’ price soaring nearly 88%, to $13.16 as of 11:45 am ET.

Lilly and Akouos expect their deal to close in the fourth quarter, subject to customary closing conditions that include antitrust clearance and the tender of a majority of the outstanding shares of Akouos’s common stock. The companies said stockholders beneficially owning approximately 26% of Akouos’s outstanding common stock, have agreed to tender their shares in the tender offer.

Upon the successful closing of that tender offer, Lilly will acquire any shares of Akouos not tendered in the tender offer through a second-step merger at the same consideration as paid in the tender offer.

“I am proud of the commitment and passion of our team, which has established Akouos as a pioneer in inner ear genetic medicine, as demonstrated by our work to advance the first investigational therapy for a genetic form of hearing loss into clinical development,” Simons stated today. “Joining Lilly—a company that shares our purpose to make life better for people around the world—will help us accelerate the development of a broad pipeline of inner ear genetic medicines.”

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