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Abstract
Quince Therapeutics (NASDAQ:QNCX) was previously Cortexyme, a biotech firm that was advancing a therapy for Alzheimer’s illness. Their first scientific stage asset, a small molecule (COR-388) that targets P. gingivalis’ (PG) position in degenerative illness development, failed to fulfill the pre-specified endpoints in a placebo managed section 2b/3 trial. Nonetheless, in an pre-specified subgroup of sufferers, the information confirmed a promising efficacy sign. Sadly, COR-388 additionally confirmed a major security sign and additional scientific growth ceased. Since that point, Quince has out licensed its subsequent technology drug, COR-588 which seems to have a greater security profile. Quince additionally introduced in a further asset after which inexplicably ceased growth. Clearly, Quince has struggled to plot a coherent path ahead. Given the utter destruction of shareholder worth that has occurred and the shortage of a transparent plan, the corporate has attracted a biotech centered investor in addition to a buyout supply.
Historical past
Atuzaginstat, (COR 388) was develop primarily based on the idea that by decreasing Pg by way of inhibition of its proteases, sufferers with Pg an infection and Alzheimer’s illness may doubtlessly profit. COR-388 was examined within the GAIN trial which enrolled sufferers with delicate to average Alzheimer’s illness. Whereas COR-388 failed to fulfill the pre-specified endpoints within the ITT inhabitants as measured by ADAS cog, there have been encouraging alerts suggesting efficacy. Within the pre-specified subgroup of sufferers handled with excessive dose COR-388 who have been Pg DNA constructive of their saliva, there was a 57% slowing of cognitive decline (p=0.002) which is statistically vital. As well as, the low dose confirmed a 42% slowing with a p worth of 0.07. Neither dose had a statistically vital impact on practical decline. Whereas these outcomes are removed from definitive, they do counsel there could also be an efficacy sign.
Cortexyme- GAIN trial
Sufferers with Pg infections are the truth is the logical cohort who would reply to therapy primarily based on the speculation. As as to if the efficacy sign is significant, Dr. Dave Sherman wrote in a notice to traders after the information readout,
It’s sturdy validation of the pathogen speculation. If P. gingivalis is not causally concerned within the illness development, it is exhausting to account for an impact of this magnitude. And a 50% slowing in cognitive decline is not on the sting. It is exhausting to see that as statistical noise…
Dr. Knopman, of the Mayo Clinic, believed a further trial ought to be performed. When interviewed by BioPharma Dive after the CTAD convention. He stated,
The information assist following this examine with a brand new one during which solely sufferers with detectable P. gingivalis can be enrolled.
Sadly, the administration workforce at Quince didn’t take this path.
Whereas COR388 confirmed a security sign and growth ceased after an FDA scientific maintain, Cortexyme had a second technology molecule which has demonstrated a clear security profile. It efficiently made it by means of section 1 security testing and COR-588 is able to be examined in a section 2 proof of idea examine. Regardless of the corporate having $114 million after the GAIN trial, which was sufficient to advance a subsequent technology molecule, they selected to stop growth. The administration workforce determined to desert all growth of the protease inhibitors of their pipeline and undertake an acquisition. Pfizer, who held a major funding in Cortexyme liquidated their place in its entirety. Pfizer’s funding was made on the earliest phases and seems centered on the one property within the pipeline at that time- the protease inhibitors corresponding to COR388 and COR-588. The CEO, the CMO, and the CSO resigned and exited the corporate.
Novosteo
Quince’s administration workforce determined to amass Novosteo in Might of 2022 which was within the preclinical phases of growing a drug for osteogenesis imperfecta and fractures, NOV004. The acquisition of Novosteo by Cortexyme to kind Quince Therapeutics seems to be a related-party transaction as a result of David Lamond, who sat on the Cortexyme (and now Quince) BoD was additionally an proprietor of Novosteo.
This acquisition has not labored out nicely for shareholders. Within the present 10-k they state, “Uncommon illness goal affected person populations of NOV004 are small, and the addressable affected person inhabitants even smaller, we could not be capable of efficiently out-license this asset.” It additional states,
As a result of the potential goal populations are very small, we could not notice any vital return from the potential sale of this asset.
There’s not a lot logic in spending thousands and thousands of {dollars} to do pre-clinical testing on a drug which the corporate doesn’t want to additional develop and has a small addressable market making it unattractive for others. It’s obscure why administration believes an acquirer would need to license the drug after they themselves have chosen to stop growth.
In Might of 2022, Dr. Dirk Thye, CEO of Novosteo, commented,
We intend to capitalize on the mixed property of Novosteo and Cortexyme by driving our therapeutic candidates by means of growth.
That is now the second asset the corporate has determined to not develop which they wholly owned. Maybe extra importantly, the corporate laid out a path–“driving our therapeutic candidates by means of growth, ” but they didn’t comply with it. Just lately, Dr. Phillip Low who’s a nicely revered scientist/scholar and a really profitable biotech entrepreneur left the Board of Administrators.
Just lately, Quince’s CEO Dr. Thye introduced that,
We imagine our optimum development plan lies in dedicating our capital, drug growth, and company assets towards the in-licensing and acquisition of clinical-stage property.”
That is fairly a obscure purpose and given their monitor file at in-licensing/drug acquisition is lower than stellar, this seems to be an unsuitable plan, particularly given the restricted capital out there. In my opinion, it’s unclear what enterprise Quince is engaged in given they’ve twice opted to not full the event of therapeutics they wholly owned.
Remarkably, in its latest 10K, Quince acknowledges that by ceasing the event of NOV004, they warn about being delisted by Nasdaq:
a Nasdaq-listed firm with no or nominal operations and both no or nominal property, property consisting solely of money and money equivalents, or property consisting of any amount of money and money equivalents and nominal different property is mostly thought of to be a public shell. Listed corporations decided to be public shells by Nasdaq could also be topic to delisting proceedings…
Being delisted by Nasdaq doesn’t seem to learn shareholders who could obtain even much less data on the corporate’s operations. Absolutely, it is going to make it difficult to draw the institutional traders wanted to fund drug growth for scientific stage property which is the trail the corporate states they’ll pursue.
Clearly, the trail administration has chosen during the last two years has had a very poor consequence for shareholders. The corporate’s inventory worth displays this reality- It’s down roughly 70% since its acquisition of NOV004/ Novosteo in Might of 2022. At the moment, the corporate has workers working in medical, scientific growth, CMC and so on. regardless of the corporate having no medication beneath growth. Whereas these workers are doubtless extremely certified and honorable individuals who may make a significant contribution, it isn’t clear what duties may exist for these workers given there isn’t any drug growth, commercialization or manufacturing occurring. The corporate expects to burn by means of a further $11 million in 2023 whereas they search out one other asset to amass and search to out-license NOV004.
Purchase Out Affords
Traders have taken discover of the questionable administration choices. Quince lately obtained a letter from Echo Lake Capital, who states they’re one of many largest shareholders and provided to purchase the corporate in its entirety for $1.60 per share regardless of the corporate having roughly $2.55 per share in money. They notice the chance of being delisted, that the corporate has,”traditionally disillusioned traders and presently lacks credibility within the funding neighborhood” along with the shortage of an acceptable marketing strategy. Whereas this supply clearly is worse for shareholders than merely paying the money as a dividend, sadly, it’s a very correct description of the present state of affairs.
Echo Lake Capital is just not alone in its curiosity in Quince Therapeutics. SEC filings point out Tang Capital Companions owns 3,620,000 shares making it the most important shareholder. Latest actions by Tang Capital present they’ve engaged with different floundering biotech corporations which they’ve taken positions in. Just lately, they proposed a buyout and a CVR for Jounce Therapeutics. Concentra Biosciences, which Kevin Tang is CEO of, has made a suggestion which seems to be beneath the worth of the money readily available. Mr. Tang lately wrote that,
the administration of Concentra has the experience and assets to each maximize the worth of the CVR for the good thing about legacy Jounce stockholders and responsibly wind down scientific examine actions for the good thing about sufferers.
It’s attainable that Tang Capital (or its subsidiary) has related plans for Quince Therapeutics.
Royalties
Quince, after deciding to not develop the protease inhibitors, licensed them to a non-public firm, Lighthouse Pharma. Lighthouse is run by the prior administration workforce of Cortexyme together with the CEO, CSO, CMO and CDO who oversaw the event of COR-388 by means of the section 2b/3 GAIN trial readout. Lighthouse can pay Quince as much as $150 m in milestone funds and royalties within the excessive single- digit to mid- teenagers. Quince additionally obtained a 7.5% possession in Lighthouse.
A section one placebo-controlled, double-blind trial of COR588, a lysine gingipain inhibitor, confirmed no SAEs when doses from 25mg to 200 mg have been examined in people and no laboratory abnormalities have been discovered. Importantly, no liver opposed results have been famous and the drug was discovered to penetrate the central nervous system. COR-588 is section 2 prepared and presumably Lighthouse Pharma will provoke a examine assuming they receive the mandatory funding. Lighthouse doubtless seeks to copy the profit seen within the GAIN trial within the 242 affected person subgroup who had detectable ranges of Pg of their saliva in a bigger trial utilizing COR 588.
Alzheimer’s illness is the crown jewel of drug growth because it represents a multi billion greenback alternative ought to a really efficient therapeutic be developed for even a subset of sufferers. In my opinion, the one property that Quince Therapeutics has that will have any vital worth are the potential royalties and milestone funds from the legacy small molecule protease inhibitors and the fairness in Lighthouse Pharma.
Conclusions
Given Quince’s aversion to following by means of on “driving our therapeutic candidates by means of growth” and lack of a promising marketing strategy, it seems silly and futile to proceed to burn money floundering. The CEO has overseen the destruction of shareholder worth on his watch and now seems to have a obscure plan to in-license new property whereas historical past has demonstrated this has not labored nicely.
One different plan of action could also be to easily turn out to be a particularly lean digital shell firm that homes the royalties whereas they watch for Lighthouse to succeed or fail at growing an Alzheimer’s therapy. In the event that they fail, the money remaining may merely be distributed. Ought to they succeed, Quince may doubtlessly promote the royalties and milestones to an organization corresponding to Royalty Pharma (RPRX), liquidate their place in Lighthouse Pharma and distribute the proceeds to shareholders earlier than closing store.
One other constructive growth might be the corporate buying a brand new administration workforce enthusiastic about following by means of with drug growth and keen and in a position to chart a path ahead. Quince has one buyout supply and should find yourself with different suitors. This can be a constructive for shareholders if a suitor emerges who has each the experience and assets to maximise the worth for shareholders.
Most seasoned biotech traders perceive that many drug trials fail and that even very promising scientific concepts usually don’t work out within the clinic. Nonetheless, this story is rather more—It’s the story of how an organization that had traders corresponding to Takeda and Pfizer and was legitimately attempting to develop a breakthrough therapy turned a very totally different entity. Sadly, for my part, Echo Capital’s description of the standing of Quince Therapeutics is correct. It’s not promising for traders to spend money on a administration workforce with a poor latest monitor that didn’t execute on their said purpose of growing therapeutics, is just not discovering, growing or advertising and marketing any medicines, communicates nothing significant to their shareholders but continues to burn money whereas advising shareholders of an imminent delisting of their 10-k.
Editor’s Word: This text covers a number of microcap shares. Please concentrate on the dangers related to these shares.
