Crippled Bay Area Pharma Threshold Rockets on Reverse Merger Deal With Molecular Templates
March 17, 2017
By Alex Keown, BioSpace.com Breaking News Staff
SOUTH SAN FRANCISCO – Shares of Threshold Pharmaceuticals have shot up more than 43 percent this morning after the company announced it was merging with Austin, Texas-based Molecular Templates, Inc. and receiving an infusion of millions of dollars in financing.
Following the close of the merger, the company will be known as Molecular Templates, Inc. The ticker symbol on the Nasdaq Capital Market will change to MTEM, Threshold said in its announcement this morning.
The move comes three months after Threshold announced it was slashing two-thirds of its workforce in order to direct financial resources at a mid-stage cancer drug. That round of layoffs came after another one of its experimental cancer drugs, evofosfamide, failed two late-stage trials. Evofosfamide is an investigational hypoxia-activated prodrug for the treatment of advanced pancreatic adenocarcinoma and advanced soft tissue sarcoma. Although the drug failed two trials, Threshold said it was seeking a way forward with the drug.
Under the agreement, Molecular will merge with a wholly-owned subsidiary of Threshold in an all-stock transaction. The transaction will result in a combined company focused on the development of novel treatments for cancer.
The merger is being supported financially by a $20 million investment from venture firm, Longitude Capital. The funding will be used to support advancement of evofosfamide and Molecular’s lead product candidate, MT-3724, an Engineered Toxin Bodies (ETB) that targets the CD20 cell surface antigen present in a variety of lymphomas and leukemias.
Molecular’s ETB, according to the company, have the affinity of an antibody, the ability to induce cellular internalization against non-internalizing receptors, and a novel mechanism of cell-kill (ribosome inhibition) in oncology. In an earlier Phase I trial, MT-3724 demonstrated good safety and efficacy in elderly, heavily pre-treated patients diagnosed with relapsed and refractory non-Hodgkin’s lymphoma. In addition to MT-3724, Molecular Templates has preclinical programs targeting HER2 and PD-L1 and has received $15.2 million in new funding commitments from The Cancer Prevention and Research Institute of Texas for its program targeting CD38.
Barry Selick, Threshold’s chief executive officer, said the reverse merger with Molecular provides Threshold shareholders with “a significant equity stake in a biopharmaceutical company with a promising cancer therapy… as well as an innovative and unique technology platform that has generated preclinical drug candidates to treat multiple myeloma, breast cancer and melanoma.” After examining strategic alternatives for Threshold in the wake of the troubles it saw at the end of 2016, Selick said the transaction brings promising drug candidates and a strong management team into the fold.
Eric Poma, who has been CEO of Molecular, will become CEO of the combined companies. Selick will become chairman of the board of directors of the combined company.
Under the deal, current Threshold shareholders would own approximately 34.4 percent of the combined company and current Molecular Templates shareholders would own approximately 65.6 percent of the combined company.
In addition to evofosfamide, Threshold is also developing tarloxotinib bromide, the company's novel epidermal growth factor receptor tyrosine kinase inhibitor. Tarloxotinib is being evaluated for the treatment of non-small cell lung cancer as well as for patients with recurrent or metastatic squamous cell carcinomas of the head and neck or skin.