Finance Watch: Genocea, Mateon Shift Strategies, Cut Jobs To Preserve Cash

Genocea shifts to preclinical neoantigen-based cancer vaccines rather than advance a Phase III-ready herpes program on its own and Mateon gives up on its lead drug as placebo outperforms. Also, Juno tops recent public company financings and new VC funds back early-stage firms.

Investors apparently aren't as enthusiastic about Genocea Biosciences Inc.'s neoantigen-focused cancer vaccine program as its CEO is, because the company's stock plunged after it revealed plans to shelve a Phase III-ready herpes therapy to focus on the preclinical immuno-oncology platform.

Genocea made the strategic shift despite the positive Phase IIb results for GEN-003, an immunotherapy for the treatment of genital herpes, that it reported in July. (Also see "Pipeline Watch: Phase III Starts With Rimegepant, ARQ087 And SGX942" - Scrip, 31 Jul, 2017.) Meanwhile, Mateon Therapeutics Inc. recently took a more traditional route to layoffs and cash preservation, announcing another negative interim readout for its lead cancer drug candidate, which led the company to end that development program in favor of another opportunity.

Cambridge, Mass.-based Genocea said after the stock market closed on Sept. 25 that it is "exploring strategic alternatives" for GEN-003, seeking a partner or acquirer to conduct a Phase III clinical trial and pursue a path to approval and commercialization. (Also see "Genital Herpes: New Therapeutic Approaches Advance" - Scrip, 19 Jan, 2017.) In the meantime, the company will suspend all GEN-003 development activities, resulting in a 40% reduction in head count. (Also see "Genocea Boosted By Biotech's Recent Rise After 12-Month Herpes Data Update" - Scrip, 1 Apr, 2016.)

Genocea said it is doing this because its ATLAS technology is superior to other platforms that seek to identify individual patients' neoantigens and develop treatments that redirect T cells to attack those antigens, which are created as tumors mutate. The company believes that ATLAS is particularly adept at identifying neoantigens that prompt a response from CD4 and CD8-positive T cells.

Genocea intends to submit an investigational new drug (IND) application to the US FDA by early 2018 for its lead neoantigen-targeting cancer vaccine candidate GEN-009. That should enable initiation of a Phase I solid tumor trial in the first half of next year so that the company can report initial immunogenicity data in the first half of 2019.

However, after paying $1.1m in severance costs to save $6.5m per year by halting GEN-003 development, its $35.2m in cash as of June 30 will last only until mid-2018. One of its competitors in the neoantigen-targeting cancer vaccine field, Gritstone Oncology, appears to be better prepared to pursue this approach with more than $200m in venture capital raised since 2015. (Also see "Gritstone Grabs $92.7m To Test Personalized Vaccines In Humans" - Scrip, 11 Sep, 2017.)

Given the early stage of Genocea's new lead development program and cash that would appear to be insufficient to support the strategy, the company's stock fell to $1.25 per share on Sept. 26 from $5.33 before the shift away from GEN-003 was announced.

Mateon already was trading well below $1 per share before its update on Sept. 26 in which the company said it would discontinue development of the vascular disrupting agent (VDA) known as CA4P based on the third interim analysis from its Phase II/III FOCUS trial in platinum-resistant ovarian cancer. CA4P and placebo were tested in combination with Roche's Avastin (bevacizumab) and – as with the second interim analysis – more patients achieved a partial response in the placebo arm. (Also see "Mateon's CA4P Disappoints At Second Interim Analysis, More Data Awaited" - Scrip, 17 Aug, 2017.)

Mateon provided the update after the stock market closed on Sept. 26 and it fell 36.4% to close at $0.27 on Sept. 27. The company is sticking to its philosophy, however, that vascular-targeting therapy (VTT) designed to disrupt blood vessel growth in tumors can be combined with therapies like Avastin that prevent the formation of new blood vessels to improve response rates in various cancers.

South San Francisco-based Mateon's new lead drug candidate is OXi4503, which is being tested in combination with cytarabine in a Phase Ib/II acute myeloid leukemia (AML) study. To focus its limited resources – $5m as of June 30 – on OXi4503 in AML, the company implemented additional job cuts, reducing its work force by 60% since the beginning of 2017. Its executives also took a 50% pay cut.

In other restructuring news:

• Otonomy Inc., which is focused on diseases and disorders of the ear, provided an update on Sept. 13 regarding its focus on extending the use of its $150.5m in cash as of June 30. The San Diego, Calif.-based company initiated a review of its portfolio at the end of August after it ended development of Otividex based on negative Phase III results in Meniere's disease. (Also see "Finance Watch: Lilly Cuts 3,500 Jobs Globally To Drive Growth" - Scrip, 7 Sep, 2017.) Otonomy now says it will cut one-third of its staff not involved in the commercialization of Otiprio (ciprofloxacin otic suspension) and it will not initiate any new clinical trials for Otiprio or OTO-311 (gacyclidine) this year. The move will save $7m for the rest of 2017 and cut this year's non-GAAP operating expenses to $73m to $78m versus prior guidance of $80m to $85m. The company's cash burn in 2018 is estimated to be $45m and cash on hand is expected to fund Otonomy into 2020.
• Cambridge, Mass.-based Inotek Pharmaceuticals Corp., whose stock sank following two failed Phase III glaucoma drug studies, will merge with Rocket Pharmaceuticals Ltd., a gene therapy developer focused on rare diseases. (Also see "Inotek Considers Its Options After Another Glaucoma Failure" - Scrip, 10 Jul, 2017.) The all-stock merger – the result of a strategic review Inotek initiated in July after trabodenoson failed its second Phase III test – will leave the company's shareholders with a 19% stake in the combined firm. The company will be known as Rocket Pharmaceuticals with its headquarters in New York City and a pipeline of mostly preclinical gene therapies; its lead candidate for Fanconi anemia is in Phase I.

Juno Profits From Gilead's Kite Buy

Juno Therapeutics Inc. didn't need cash when it priced 6.1m shares at $41 each on Sept. 21, since it had $801.8m as of June 30. However, the chimeric antigen receptor T cell (CAR-T) developer capitalized on the one-year high its stock reached in the weeks after Juno Therapeutics Inc. said it would pay $11.9bn for Juno's rival Kite Pharma Inc. (Also see "Gilead Makes Cell Therapy The Base Of Its Oncology Platform With Kite Buy" - Scrip, 29 Aug, 2017.)

The deal and US FDA approval for Novartis AG's Kymriah (tisagenlecleucel) were seen as validating events likely to generate new investor interest in the CAR-T field. Juno's offering closed on Sept. 26, grossing $318.7m, including overallotments and the sale of 758,327 shares to the company's partner Celgene Corp. through a separate private placement.

Other recent and significant public offerings include:

• Acceleron Pharma Inc., another Celgene collaborator, priced 5.4m shares at $37 each to net $187.6m before the sale of overallotments on Sept. 20. The funds will be added to Acceleron's $194m in cash as of June 30 and will be used for clinical trials and general expenses. Phase III results for the company's lead drug candidate luspatercept in beta-thalassemia and myelodysplastic syndromes are expected in 2018. The TGF-beta therapeutic is being developed under a 2011 partnership agreement with Celgene. (Also see "Celgene Pays Acceleron $25M up front under anaemia drug partnership " - Scrip, 3 Aug, 2011.)
• The Danish firm Ascendis Pharma AS priced 3.8m American depository shares (ADSs) at $35.50 each on Sept. 27 to net $126.1m for the development of its TransCon technology, including clinical trial, regulatory and commercialization costs for TransCon Growth Hormone, which is in Phase III for children with growth hormone deficiency.
• TherapeuticsMD Inc. priced 12.4m shares on Sept. 25 at $5.65 each to gross $70.06m, which will fund clinical trials and general expenses for its women's health portfolio, including commercial preparations and commercialization of TX-001HR (applicator-free vaginal estradiol softgel) for moderate-to-severe vaginal pain during intercourse caused by vaginal atrophy. The FDA issued a complete response letter (CRL) rejecting the drug due to a lack of information about long-term safety in May, but TherapeuticsMD said on Sept. 14 that it provided additional safety data and will meet with the agency in November to determine if more data or a new clinical trial is needed. (Also see "Keeping Track: Immuno-Oncology Racks Up More Approvals; Bar Still Too High For Advair Generics" - Pink Sheet, 14 May, 2017.)
• Kadmon Holdings Inc. priced 24m shares at $3 each on Sept. 26 for gross proceeds of $72m. The stock was sold with warrants to purchase up to 9.6m more shares. The New York-based developer of treatments for autoimmune and fibrotic diseases has three drugs in Phase I and II development across multiple indications and will use the new cash to fund those and its preclinical programs. Kadmon went public at $12 per share last year. (Also see "IPO Update: Protagonist, Gemphire, Kadmon Launches Fall Flat" - Scrip, 18 Aug, 2016.)
• The autologous cell therapy developer Iovance Biotherapeutics Inc. also benefitted from rising investor interest in CAR-T therapies following the Gilead/Kite deal and Novartis' Kymriah approval and took advantage of the opportunity to raise cash. The San Carlos, California-based firm priced 7.7m shares at $6.50 on Sept. 20 for about $50m in gross proceeds to fund ongoing Phase II clinical trials for LN-144 and the development of LN-145 as well as the scale-up of commercial manufacturing activities. (Also see "Rising Tide Lifts All CAR-T Ships After Gilead/Kite Deal, Kymriah Approval" - Scrip, 4 Sep, 2017.)

Lightstone, Vesalius Raise New VC Funds

Lightstone Ventures (LSV) raised a $250m venture capital fund called Lightstone Ventures II LP (LSV II), which exceeded the VC firm's $200m goal, to finance early-stage life science companies – both drug developers and medical device makers in the US, Europe and Asia.

LSV's first fund totaled $172m and resulted in four exits from portfolio companies – three initial public offerings by Catabasis, Flex Pharma and Ra Pharma as well as the acquisition by Gilead of Nimbus Apollo Inc. in April 2016 for up to $1.2bn. (Also see "Gilead Buys Nimbus NASH Drug To Dominate Another Liver Disease" - Scrip, 5 Apr, 2016.) The firm's second fund is the $50m Lightstone Singapore LP in partnership with Temasek and the corporate investment arm of Singapore's economic development authority.

Vesalius Biocapital also recently announced a new geographically-focused life science VC fund known as Vesalius Biocapital III to focus on companies in Portugal. The firm has raised the first €65m of a planned €150m fund, but said earlier this year that its third fund would back European companies more generally. (Also see "Finance Watch: Two More US Biopharma IPOs And Two New European VC Funds" - Scrip, 20 May, 2017.)

Seven therapeutics firms in Europe, North America and Asia recently announced new funding rounds ranging from $10m to $80m, including:

• The London-based next-generation T cell therapy developer Autolus Ltd. said on Sept. 25 that it closed an $80m Series C venture capital round. (Also see "Autolus Raises $80m To Take T-Cell Engineering To The Next Level" - Scrip, 26 Sep, 2017.) The fundraising was supported by Cormorant Asset Management, Nextech Invest and other new investors as well as existing backers Syncona Ltd., Woodford Investments Management and Arix Bioscience. (Also see "Arix To Nurture Next Generation Biotechs After UK IPO" - Scrip, 3 Feb, 2017.) The company closed a $56m Series B round in March 2016. (Also see " Engineered T-Cell Company Raises $56m And Lands New CEO " - Scrip, 3 Mar, 2016.)
• Fusion Pharmaceuticals Inc. in Hamilton, Ontario revealed on Sept. 25 that it added $21m from new investors – including Adams Street Partners, Seroba Life Sciences and Varian Medical – to its Series A round, bringing the total to $46m. Fusion is developing targeted alpha-particle radiotherapeutics and will use its new capital to accelerate the development of lead therapeutic candidate FPX-01, to expand the company's pipeline and to form new partnerships. FPX-01 selectively delivers actinium-225 to tumor cells that express a biomarker common in refractory cancers. The first $25m of the Canadian company's Series A was announced in February. (Also see "Venture Funding Deals" - Scrip, 10 Mar, 2017.)
• Engage Therapeutics Inc. in Summit, NJ announced a $23m Series A round on Sept. 27 to fund a Phase IIb clinical trial for Staccato alprazolam, a rescue therapy for people who have uncontrolled epileptic seizures. It's delivered by a Staccato handheld inhaler developed by Alexza Pharmaceuticals Inc. – the same company, now owned by Grupo Ferrer Internacional SA, that developed the inhaled drug Adasuve (loxapine) for agitation associated with schizophrenia or bipolar disorder. (Also see "Alexza's Adasuve crosses US finish line, but distribution limited " - Scrip, 22 Dec, 2012.) TPG Biotech led Fusion's Series A with participation from Adage Capital Management and Lumira Capital.
• Paris-based Eligo Bioscience SAS closed a $20m Series A round supported by Khosla Ventures and Seventure Partners, including a $2m award from the Worldwide Innovation Challenge, the microbiome-focused company said on Sept. 26. Eligo is developing drugs to prevent and treat bacteria-associated diseases and will use the venture capital to take its lead drug candidate into clinical trials. That drug will deliver a CRISPR Cas payload to the microbiome to detect the gene associated with the disease-causing bacteria and cut the gene to kill the bacteria. Eligo's technology will be used to deliver various payloads to selectively kill targeted bacteria.
• XW Laboratories Inc. in Wuhan, China revealed a $17.5m Series B round on Sept. 20, which was led by Elements Capital and WI Harper with new investor KTB Network. Prior Investors Kleiner Perkins Caufield & Byers China, Johnson & Johnson Innovation – JJDC Inc. and WuXi Venture also participated. The company has raised $23m to date to fund drug development for the treatment of neurological disorders. XW Labs plans to take at least one drug candidate into clinical trials in 2018. Its first two drug development platforms improve the pharmacokinetics and safety of approved medicines, but its third platform – licensed earlier this year from the University of Pittsburgh – is focused on reducing damage to mitochondria. (Also see "Tech Transfer Roundup: Ohio State Turns To Industry Exec To Optimize Assets Before A Deal" - Scrip, 7 Apr, 2017.)
• Salt Lake City, Utah-based DiscGenics Inc. said on Sept. 26 that it closed a $14m Series B round, bringing its funding to date to $21.7m. The new round was led by the company's board of directors, existing long-term investors and new investor Mitsubishi UFJ Capital Co. Ltd. The money will fund Phase III development of IDCT, an allogeneic cell therapy for mild-to-moderate degenerative disc disease, i.e. low back pain.
• Landos Biopharma Inc. of Boston as well as Blacksburg, Va. raised a $10m Series A round backed exclusively by Perceptive Advisors LLC to fund the development of treatments for autoimmune diseases. Landos is targeting a novel pathway called lanthionine synthetase C-Like 2 (LANCL2), which may offer anti-inflammatory effects. Lead drug candidate BT-11 is an oral therapy that's being developed to treat Crohn's disease and ulcerative colitis; the company hopes to complete a Phase I trial by 2019. Landos is working with the life science company accelerator Xontogeny LLC, which launched in May with the first $15m of a $25m Series A round. (Also see "Finance Watch: Two More US Biopharma IPOs And Two New European VC Funds" - Scrip, 20 May, 2017.)