Aerovate plans to lay off nearly all employees after trial failure

Aerovate Therapeutics plans to lay off nearly all its employees two weeks after its lead asset flunked a mid-stage trial.

The company disclosed the workforce reduction on Friday evening in an SEC filing, saying 39 employees — roughly 78% of the company — have been told they’ll be let go. Aerovate described the cuts as the “first wave” and said it expects “that nearly all of its workforce will be terminated in the coming months.”

The company’s Phase 2b trial failure of its pulmonary arterial hypertension (PAH) therapy raised questions about the company’s future.

The study found that the inhaled version of cancer drug imatinib did not lead to statistically significant improvements in pulmonary vascular resistance across three dose ranges. Aerovate also reported that inhaled imatinib did not show meaningful improvements across “several” secondary endpoints. As a result, Aerovate shut down the trial’s Phase 3 and long-term extension arms.

Shares $AVTE sank about 90% the day the data were released.

George Eldridge

In the SEC filing on Friday, Aerovate said it will incur $5.6 million in one-time losses in the third and fourth quarters of the year, mostly attributed to paid-out severance benefits. The company issued an amended filing on Monday confirming that Tim Noyes remains CEO after previously listing CFO George Eldridge as the company’s CEO.

Aerovate, which launched out of RA Capital’s incubator in 2020 with $72.6 million in Series A funds led by Sofinnova, still has about $100 million in cash and short-term investments. It does not have any other assets listed in its pipeline.

The PAH market has become increasingly competitive this year following the approval of Merck’s Winrevair in late March. Johnson & Johnson also snagged an approval for combo med Opsynvi that same month. Opsynvi combines two other PAH treatments, tadalafil and Opsumit, and was found to improve pulmonary vascular resistance better than either option on its own.

Opsumit, which was acquired by J&J through its $30 billion buyout of Actelion in 2017, is nearing a patent cliff in 2025.

Editor’s note: This story was updated after Aerovate corrected George Eldridge’s title in an amended securities filing. He remains CFO and Tim Noyes remains CEO.