Execs celebrate the birth of Idercryst; investors, not so much

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Failed biotechs never die – they usually get reincarnated under a different name and a new focus, though still run by the same management team. Biocryst’s merger with Idera might be an example of this survival strategy, though it has left investors in both groups distinctly unimpressed.

Among the reasons for the market’s disappointment is the combined company’s lack of focus and move away from immuno-oncology, as well as a share ratio that gives majority control to investors in Biocryst – a company tainted by repeated failures. Current holders must make do with a $243m cash balance and the hope that this time it might be different.

Long-term Biocryst investors have already endured numerous changes of focus at a company that, under the leadership of Jon Stonehouse since 2007, lurched from one disaster to another. The one bright spot was Mr Stonehouse’s failure to acquire Presidio Pharmaceuticals for $101m in 2012; that private company is now moribund.

Opportunistic?

Biocryst’s clinical flops include peramivir in influenza, BCX5191 in hepatitis C, ulodesine in gout and avoralstat in hereditary angioedema (HAE).

The last of those caused a share price collapse in February 2016, though since then the stock has gained over 200% (Biocryst hit with a HAE-maker, February 8, 2016). It is likely thanks to this that Biocryst was able to negotiate its majority control (51.6%) of the combined entity, and Idera investors might thus view the merger as opportunistic.

Idera stock yesterday slumped 15%, while Biocryst was off 5%. Idera had fallen along with the rest of the market since biotech’s mid-2015 peak, but was most recently hurt by a $46.8m equity offering done at a 26% discount.

Despite Biocryst’s majority ownership the merged company is effectively an enlarged Idera, run by Idera’s C-suite from Idera’s Pennsylvania headquarters. Mr Stonehouse remains with the group, but will take a back seat as a director.

The combined group, as yet unnamed, has been billed as having a rare disease focus – a strategy seemingly out of a deal banker’s 2011 pitchbook. One advanced R&D asset that certainly qualifies under this description is Idera’s IMO-8400, a TLR antagonist for the rare inflammatory disease dermatomyositis.

Kallikrein continued

Idera investors can bemoan the fact that the portfolio is being filled out by Biocryst’s BCX7353, an oral kallikrein inhibitor for HAE prevention; avoralstat, the failed HAE project, also inhibited kallikrein, though Biocryst argued that it had insufficient bioavailability.

Interim phase II BCX7353 data showed some activity, albeit lacking a dose-response relationship. The main rationale for retaining a focus on HAE appears to be that some of Idera’s management had been involved in developing a competing HAE drug.

The next data readout should come by the half year, from a phase II trial of IMO-8400. Idera’s IMO-2125, a TLR agonist, is due to enter phase III in combination with Yervoy in what the group terms PD-1-refractory melanoma.

Still, immuno-oncology looks to be relegated to the back burner. “Don’t get confused by the idea that this is a cancer company,” said Mr Stonehouse on an analyst call yesterday. “This is a rare disease company, Idera, now joining another rare disease company.”

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