Once Promising Bay Area KaloBios to Shut Down, Liquidate Assets

Published: Nov 18, 2015

Once Promising Bay Area KaloBios to Shut Down, Liquidate Assets
November 16, 2015
By Mark Terry, BioSpace.com Breaking News Staff

South San Francisco-based KaloBios Pharmaceuticals, Inc. announced Friday that it will be wrapping up its operations and liquidating its assets. On Nov. 5, after a string of disappointing clinical trials, the company announced it was cutting its workforce by 61 percent and restructuring the company, as well as contemplating a sale.

The 61 percent was 17 people, and was cited as being needed in order to shift resources to the development of lenzilumab, or KB003, a potential drug for the treatment of chronic monomyelocytic leukemia (CMML). An anti-GM-CSF mAb originally tested for asthma, it was not found to be useful for that indication. The company’s IND in CMML, an orphan drug indication, has been cleared by the U.S. Food and Drug Administration (FDA), and was just starting a Phase I trial that was expected to begin before the end of the year.

The company also indicated that it was pausing enrollment in its Phase II trial of KB004 in certain hematologic malignancies.

Now the company is indicating it is discontinuing KB004 and KB003. The company has hired The Brenner Group, a restructuring firm, to bring things to a close and sell off assets.

The company indicates it has repaid in full its secured loan obligation to MidCap Financial for about $6.6 million.

“Recent discussions around a number of possible strategic transactions have ended,” said Herb Cross, chief financial officer and interim chief executive officer in a statement, “and as a result, the company believes it is highly unlikely that continuing to explore strategic alternatives could generate a viable transaction within the time frame allowed by our limited cash resources.”

The company was founded in 2000 and had several equity rounds and deals with Novartis and Sanofi . It went public on the Nasdaq on February 2013, with shares trading at $60 per share.

In July 2014, Sanofi walked away from their deal. Under that original deal, Sanofi Pasteur had been developing KB001-A, a patented monoclonal antibody that targeted Pseudomonas aeruginosa (Pa), for Pa pneumonia. KaloBios had been working on KB001-A for chronic treatment of Pa lung infections in cystic fibrosis (CF) patients.

Sanofi terminated the deal for low single digit royalties on net sales of KB001-A, subject to a $40 million cap on the aggregate royalties. Sanofi was also entitled up to 10 percent of certain sub-license payments or other milestone payments.

Company president and chief executive officer David Pritchard retired suddenly in January 2015, also resigning as member of KaloBios’ board of directors. It was about this time that the company officially shifted from pulmonary research toward cancer research.

In January 2014, KaloBios reported disappointing topline results from its Phase II study of KB003 in asthma patients. The drug did not meet key endpoints.

At the time, analysts at Zacks Equity Research stated, “We are highly disappointed by the news on KB003. KaloBios does not have any marketed product. Consequently its pipeline has to deliver. Similar pipeline related setbacks will be catastrophic for the company.”

Which seems prescient now. KaloBios never fulfilled its promise. Shares traded for $64 on Feb. 2, 2013, spiked briefly on Jan. 17, 2014 to $43.28 after a falloff, and dropped steadily to $14.88 on Jan. 2, 2015. Shares dropped to $1.93 on Nov. 5, 2015, then plunged to $0.92 on Nov. 6. Shares are currently trading for $0.90.

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