Foghorn sounds another warning about the class of ‘20
In 2020 76 biotech floats raised a combined $12.7bn. Foghorn is not the first to show that much of the faith was misplaced.
Full clinical hold on Foghorn Therapeutics’ lead asset, a move that yesterday spurred a 25% share price decline, marks another disappointing outcome for the IPO class of 2020. The year was marked by Covid lockdowns and an apparently insatiable investor appetite for biotech.
Foghorn was one of 76 biopharma groups whose flotations collectively raised $12.7bn on western exchanges that year, smashing previous records. But an analysis of those IPOs shows that Foghorn is by no means the worst performer; that joint distinction probably goes to gene therapy companies, many of which – like Foghorn – were launched onto the public markets with little beyond preclinical backing.
Foghorn’s listing document makes this plain. Not only had the company never generated any clinical data, it had never even conducted a study in humans. IND filings for its two lead assets, FHD-286 and FDH-609, were still six months to a year away at the time of the IPO.
And yet investors happily bought into the float, largely on the strength of data in animal xenograft models. The IPO priced at $16 a share, the midpoint of its suggested range, and raised $120m.
Foghorn's focus is epigenetics – bringing about changes in gene expression by inhibiting small-molecule targets. Two such targets, BRM (SMARCA2) and BRG1 (SMARCA4), are the subject of FHD-286, Foghorn's lead. These targets are ATPases involved in catalysing a chromatin remodelling complex that Foghorn says is mutated in 20% of cancers.
Preclinical data supported taking FHD-286 into trials in uveal melanoma and AML/myelodysplastic syndromes. But it is side effects that have now derailed the compound: in May FHD-286’s AML/MDS trial went on partial hold when a patient died of possible differentiation syndrome, and yesterday this became a full clinical hold after “additional suspected cases of fatal differentiation syndrome believed to be associated with FHD-286”.
Damningly, Foghorn admits that differentiation syndrome could be associated with FHD-286’s proposed mechanism. There appear to be no other industry projects with this pharmacology in the clinic, though Prelude Therapeutics is one company looking at it preclinically.
Epigenetics in general has not delivered any major success stories; Epizyme succeeded in launching Tazverik, an inhibitor of EZH2 (loss of function of SMARCB1, SMARCA4 and SMARCA2 has preclinically been associated with aberrant function of this enzyme), but agreed to a lowball takeover by Ipsen in June.
|Inhibitors of SMARCA2 (BRM)|
|FHD-286||Foghorn||SMARCA2 & 4 inhibitor||Ph1 in uveal melanoma ongoing|
|Ph1 in AML/MDS on full clinical hold|
|PRT-SCA2/ PRT3789||Prelude Therapeutics||SMARCA2 degrader||Poster at AACR 2022|
|AU-19820||Dr Reddy's||SMARCA2 degrader||Preclinical data at AACR 2021|
|Unnamed||Ryvu (demerged from Selvita)||SMARCA2 degrader||Poster at AACR 2020|
|Unnamed||Foghorn/Lilly||SMARCA2 inhibitor||Discovery deal in 2021|
|Source: Evaluate Pharma & company publications.|
In terms of share performance Foghorn now trades some 30% below its IPO price.
True, it was not all bad news for the IPO class of 2020: that year’s poster child is undoubtedly Pandion Therapeutics, which just months after floating was acquired by Merck & Co, yielding a 234% return. Other successes include Beam Therapeutics, Legend Biotech and Royalty Pharma, though the last of these is anything but a traditional drug development business.
Unfortunately for enthusiastic investors, however, disappointments clearly outnumber such success stories. Clinical failures abound, and at least one company, Silverback, has effectively thrown in the towel, while broad fears over the current generation of gene therapy approaches have caused share prices in the likes of Taysha, Passage Bio and Freeline to crater.
As an indication of just how bad the class of 2020 was as a whole, Foghorn’s double-digit decline makes the company the 28th best-performing stock of the 76 that floated that year.
|More losers than winners: selected members of the IPO class of 2020|
|Pandion Therapeutics||234%||Acquired by Merck & Co for $1.85bn in Feb 2021|
|Beam Therapeutics||219%||$300m gene-editing deal with Pfizer in Jan 2022; BEAM-201 FDA clinical hold Aug 2022|
|Keros Therapeutics||132%||Positive data at Ash 2021|
|Royalty Pharma||55%||Royalty acquisition business|
|PMV Pharmaceuticals||-20%||Disappointed at Asco 2022|
|Foghorn Therapeutics||-31%||Full US clinical hold on FHD-286 in Aug 2022|
|Repare Therapeutics||-40%||$125m deal with Roche in Jun 2022|
|I-Mab Biopharma||-57%||Abbvie scaled back anti-CD47 deal in Aug 2022|
|Silverback Therapeutics||-74%||Discontinued work and reverse merged in Jul 2022|
|Olema Pharmaceuticals||-78%||Confusing data at SABCS 2021|
|Black Diamond||-82%||Cut back & discontinued BDTX-189 in Apr 2022|
|Taysha Gene Therapies||-83%||GM2 gene therapy project deprioritised|
|Passage Bio||-88%||Cut back in Mar 2022|
|Ayala Pharmaceuticals||-91%||Fell behind Springworks in small market niche|
|Imara||-93%||Disappointed in sickle cell in Jan 2021 & Apr 2022, tovinontrine discontinued|
|Graybug Vision||-93%||Ph2 fail in Mar 2021|
|Freeline||-95%||Problems with haemophilia B gene therapy|
|Sigilon Therapeutics||-96%||Clinical hold in Jul 2021|
|Note: *share price performance from IPO to close at 23 Aug 2022. Source: Evaluate Vantage data & company filings.|