Apogee’s pipeline in a product drug zumilokibart achieved significant disease clearance in a mid-stage atopic dermatitis trial, but investors were miffed by a royalty financing deal with Blackstone.
Apogee Therapeutics has irked investors who were hoping for an M&A deal by securing $1.3 billion in royalty financing from the private equity firm Blackstone Life Sciences.
The biotech’s shares dipped about 11% before market open on Wednesday despite delivering data for the atopic dermatitis (AD) candidate zumilokibart that Truist Securities said “looks competitive.”
Even so, the analysts weren’t surprised that the readout—which showed strong performance for the mid-dose—didn’t move the needle.
“We suspect this morning’s stock reaction … is being driven in part by the synthetic royalty agreement with Blackstone announced alongside the data,” Truist wrote in a note to clients. “Given that many investors view APGE as a potential M&A candidate, today’s transaction may signal that an acquisition is not imminent.”
CEO Michael Henderson justified the funding, however, by saying that the deal includes a provision for change of control, allowing a buyback of significant portions of the royalty.
“We felt that they were a great partner that provided us a bespoke capital structure and an attractive cost of capital that gives us a path to commercialization and even profitability without needing to rely on the equity markets anymore,” Henderson explained on an investor call Wednesday morning.
Blackstone will provide up to $1.3 billion in funding, which makes the deal the largest ever royalty financing for a pre-Phase 3 program, according to Apogee. The biotech currently has $1.3 billion in cash on hand, with the Blackstone deal adding $800 million in synthetic royalties and $500 million in a future senior debt option.
Blackstone has been granted a maximum 6.25% royalty rate on up to $5 billion in worldwide annual sales of zumilokibart, which drops to as low as 1.7% at $20 billion in sales.
With Blackstone’s backing, Apogee now has funds to commercialize zumilokibart for AD, asthma and eosinophilic esophagitis (EoE). “That was something we had heard from investors in the past, right? How will you fund this through launch and even profitability? And we have that now,” Henderson said.
Apogee wanted to preserve strategic optionality and flexibility coming out of the zumilokibart readout, and Blackstone was able to do that.
“They met us where we were on that,” Henderson said. “So, it was kind of a no-brainer from us, because it gives us a clear path forward while keeping all optionality clearly on the table.”
Alongside the financing announcement, Apogee also revealed data from part B of the Phase 2 APEX trial of zumilokibart. The results show higher performance for the mid dose as compared to the high dose, which Truist said may be disappointing to investors.
The anti-IL-13 antibody had comparable efficacy at both the mid- and high-doses, according to Apogee. The main goal was the percentage of patients who achieved at least a 75% improvement in eczema severity. The high dose saw 61.6% achievement, and the mid dose was 65.9% at 16 weeks.
“The dose‑ranging study failed to demonstrate incremental efficacy at higher doses versus current standard of care, Ebglyss,” Truist wrote. “Notably, the mid‑dose (consistent with the dose studied in Part A) outperformed the high dose across all efficacy measures.”
On safety, there was also a higher rate of non–infective conjunctivitis–related adverse events depending on the concentration of the dose.
With that said, Truist believes the mid-dose data is “broadly comparable” to Eli Lilly’s Ebglyss.
Apogee is preparing zumilokibart as a pipeline in a product, with an initial focus on AD, which the company said is a $50 billion market opportunity. A Phase 3 program is set to launch in the second half of the year, which could mean a launch in 2029, according to the investor presentation.
A Phase 2a clinical trial for EoE is also expected to begin in the second half of this year with a readout expected in the second half 2027. Apogee is also planning a Phase 2b in asthma to initiate in the first half of 2027.
