On March 27, 2017 Threshold Pharmaceuticals, Inc. (Nasdaq:THLD), a clinical-stage biopharmaceutical company developing novel therapies for cancer, reported financial results for the fourth quarter and full year ended December 31, 2016 and provided an update on the Company’s corporate and clinical development activities, including the proposed merger with Molecular Templates, Inc (Press release, Threshold Pharmaceuticals, MAR 27, 2017, View Source [SID1234518410]).
Threshold announced on March 17, 2017 that it had entered into a definitive agreement under which Molecular Templates 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. Longitude Capital, a U.S. based venture capital firm, will invest $20 million at the close of the transaction, subject to certain conditions, including the receipt of additional equity financing commitments of an additional $20 million.
Barry Selick, Ph.D., Chief Executive Officer of Threshold, said, "On behalf of the Company and the entire board of directors, I’d like to thank Threshold shareholders for their support while we conducted our extensive and thorough review of strategic alternatives, after very challenging clinical outcomes for evofosfamide and tarloxotinib." Dr. Selick further stated, "We believe Molecular Templates’ lead product candidate, MT-3724, and our lead product candidate, evofosfamide, in addition to Molecular Templates’ innovative technology platform will result in a combined company that has significant value for its stakeholders."
Recent Highlights
About the Proposed Merger
The transaction has been approved by the board of directors of both companies. The merger is expected to close in the second quarter of 2017, subject to the approval of the stockholders of each company as well as other customary conditions. Upon closing of the transaction, Threshold will change its name to Molecular Templates, Inc. and plans to change its ticker symbol on the Nasdaq Capital Market to MTEM. On a pro forma basis and based upon the number of shares of common stock to be issued in the merger, 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 although the actual allocation will be subject to adjustment based on Threshold’s net cash balance.
Eric Poma, Ph.D., Chief Executive Officer of Molecular Templates, will become Chief Executive Officer of the combined company. Following the merger, the board of directors of the combined company will consist of seven seats and will be comprised of two representatives from Molecular Templates, two representatives from Threshold, and three representatives to be mutually agreed upon by Molecular Templates and Threshold. The Company’s current chairman of the board of directors, Barry Selick, Ph.D., will become chairman of the board of the combined company following the merger.
Evofosfamide
The Company’s lead product candidate is an investigational hypoxia-activated prodrug that is designed to be activated under tumor hypoxic conditions, a hallmark of many cancers. Recent updates include:
· Held first meeting with the Japanese PMDA (Pharmaceutical and Medical Devices Agency) to present the improvement in overall survival that was observed in the Japanese sub-population of the MAESTRO Phase 3 trial. While the PMDA indicated that the current analysis of the MAESTRO data is not sufficient to support the submission of a New Drug Application ("NDA") in Japan, the Company is in ongoing discussions with the PMDA to clarify the scope of an additional study, the results of which may then support the submission of an NDA for evofosfamide in Japan.
· Investigator-sponsored and cooperative group clinical trials investigating evofosfamide in patients with pancreatic neuroendocrine tumors (pNET), recurrent glioblastoma (GBM) and hepatocellular carcinoma (HCC) and advanced biliary tract cancer (BCT) remain ongoing
· In the second quarter, the Company plans to commence a Phase 1 clinical trial evaluating evofosfamide in combination with the immune checkpoint antibody, ipilumumab, at the M.D. Anderson Cancer Center in Houston Texas to potentially improve the efficacy of immune checkpoint antibody as an anti-cancer therapy.
TH-3424
TH-3424 is the Company’s small-molecule drug candidate being evaluated for the treatment of hepatocellular (liver) cancer (HCC), castrate resistant prostate cancer (CRPC), T-cell acute lymphoblastic leukemias (T-ALL), and other cancers expressing high levels of aldo-keto reductase family 1 member C3 (AKR1C3). Tumors overexpressing AKR1C3 can be resistant to radiation therapy, chemotherapy and anti-androgen therapy. TH-3424 is a prodrug that selectively releases a potent DNA cross-linking agent in the presence of AKR1C3. Recent updates include:
· Entered into a collaboration with the National Cancer Institute (NCI) to explore the effects of TH-3424 against T-ALL xenograft cell lines with high AKR1C3 expression. The studies will be conducted through the NCI-funded Pediatric Preclinical Testing Program (PPTp). Threshold will supply TH-3424, and the NCI will fund the studies that will be conducted at the PPTP leukemia research sites.
· Investigational New Drug (IND)-enabling studies of TH-3424 have been initiated in collaboration with Ascenta Pharmaceuticals, Ltd.
Fourth Quarter and Year End 2016 Financial Results
· As of December 31, 2016 and 2015, Threshold had $23.6 million and $48.7 million in cash, cash equivalents and marketable, respectively. The net decrease of $25.1 million was a result of operating cash requirements for the year ended December 31, 2016.
· No revenue was recognized in the fourth quarter and year ended December 31, 2016 compared to $65.9 million and $76.9 million for the same periods in 2015. Revenue for the quarter and year ended December 31, 2015 related to the amortization of the aggregate of $110 million in upfront and milestone payments received from the Company’s former collaboration with Merck KGaA, Darmstadt, Germany. The revenue from the upfront payment and milestone payments received under the agreement were previously being amortized over the relevant performance period, rather than being immediately recognized when the upfront payment and milestones were earned or received. As a result of Merck KGaA, Darmstadt, Germany’s and the Company’s decision to cease further joint development of evofosfamide in December 2015, the Company immediately recognized all of the remaining deferred revenue into revenue during the quarter ending December 31, 2015. Also as a result of the termination of the agreement, the Company is no longer eligible to receive any further milestone payments from Merck KGaA, Darmstadt, Germany.
· Research and development expenses were $3.0 million for the fourth quarter ended December 31, 2016, compared to $11.4 million for the same period in 2015. The $8.4 decrease in research and development expenses, net of reimbursement for Merck KGaA, Darmstadt, Germany’s 70 percent share of total eligible collaboration expenses for evofosfamide, was due primarily to a $4.6 million decrease in employee related expenses, including a $1.0 million decrease in non-cash stock-based compensation expense and a $3.8 million decrease in clinical development expenses and consulting expenses. Research and development expenses were $16.6 million for the year ended December 31, 2016, compared to $40.3 million for the same period in 2015. The $23.7 million decrease in research and development expenses, net of reimbursement for Merck KGaA, Darmstadt, Germany’s 70 percent share of total eligible collaboration expenses for evofosfamide, was due primarily to a $14.1 million decrease in employee related expenses, including a $2.8 million decrease in non-cash stock-based compensation expense, a $8.3 million decrease in clinical development expenses and a $1.3 million decrease in consulting expenses.
· General and administrative expenses were $2.0 million for the fourth quarter ended December 31, 2016 compared to $2.2 million for the same period in 2015. The decrease in general and administrative expenses was due primarily to a $0.2 million decrease in employee related expenses. General and administrative expenses were $7.8 million for the year ended December 31, 2016 compared to $9.7 million for the same period in 2015. The $1.9 million decrease in general and administrative expenses was due primarily to a $1.5 million decrease in employee related expenses and $0.4 million in consulting expenses.
· Non-cash stock-based compensation expense included in total operating expenses was $0.7 million and $3.1 million for the fourth quarter and year ended December 31, 2016, respectively, compared to $2.0 million and $6.8 million for the same periods in 2015, respectively. The decrease in stock-based compensation expense was due to the amortization of a smaller number of options with lower fair values.
· Net loss for the fourth quarter ended December 31, 2016 was $3.7 million compared to net income of $69.7 million for the same period in 2015. Included in the net loss for the fourth quarter of 2016 was an operating loss of $5.0 million and non-cash income of $1.2 million compared to an operating income of $52.3 million and non-cash income of $17.4 million for the fourth quarter of 2015. Net loss for the year ended December 31, 2016 was $24.1 million compared to net income of $43.8 million for the same period in 2015. Included in the net loss for 2016 was an operating loss of $24.3 million and non-cash income of $0.1 million compared to an operating income of $26.9 million and non-cash income of $16.8 million for the year ended December 31, 2015. The non-cash income is related to changes in the fair value of the Company’s outstanding warrants that was classified as other income (expense).
About Evofosfamide
Evofosfamide (previously known as TH-302) is an investigational hypoxia-activated prodrug of a bis-alkylating agent that is preferentially activated under severe hypoxic tumor conditions, a feature of many solid tumors. Areas of low oxygen levels (hypoxia) in solid tumors are due to insufficient blood vessel supply. Similarly, the bone marrow of patients with hematological malignancies has also been shown, in some cases, to be severely hypoxic.
About TH-3424
TH-3424 is small-molecule drug candidate being evaluated for the potential treatment of hepatocellular (liver) cancer (HCC), castrate resistant prostate cancer (CRPC), T-cell acute lymphoblastic leukemias (T-ALL), and other cancers expressing high levels of aldo-keto reductase family 1 member C3 (AKR1C3). Tumors overexpressing AKR1C3 can be resistant to radiation therapy and chemotherapy. TH-3424 is a prodrug that selectively releases a potent DNA cross-linking agent in the presence of AKR1C3. Preliminary nonclinical toxicology studies suggested an adequate therapeutic index that the Company believes warrants conducting Investigational New Drug (IND)-enabling toxicology studies, which are being done in collaboration with Ascenta Pharmaceuticals, Ltd.
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