Four months into 2022, the public financial markets continue to reel from months of losses reflected in declining stock prices and fewer companies going public.
So why is privately-held Cytovia Therapeutics, a developer of cell therapies and immunotherapies against cancer, positioning itself to trade its first public shares? Not through a traditional initial public offering (IPO), but via a special purpose acquisition company (SPAC), a segment that has seen regulatory as well as financial challenges?
“We believe that the capital that’s required to be successful is substantial. And despite the short-term challenges of public markets, there is more capital available in public markets than in private markets,” Daniel Teper, PharmD, MBA, Cytovia’s Co-Founder, Chairman, and CEO, told GEN Edge. “That’s why most of our competitors are public companies.”
Cytovia’s parent Cytovia Holdings has disclosed plans to go public by merging with Isleworth Healthcare Acquisition Corp., a SPAC based in St. Petersburg, FL, in a deal expected to be completed in the third quarter.
Upon completion, Isleworth will be renamed Cytovia Therapeutics, with Teper heading the combined company. Its common stock and warrants are expected to remain listed on NASDAQ under the ticker symbols INKC and INKCW, respectively.
More importantly, the combined company will continue Cytovia’s work of researching, developing, and manufacturing therapies based on its complementary natural killer (NK) cell and NK engager antibody platforms.
With its plans to go public, Cytovia is swimming upstream: During the first four months of this year, the number of mergers via special purpose acquisition companies (SPACs) has dipped, year-over-year, from 12 to nine. The number of biotech IPOs stood at just 15, plunging 72% from 54 a year ago, according to Informa Pharma Intelligence.
Over the past year, the U.S. Securities and Exchange Commission (SEC) dampened investor enthusiasm for SPACs, issuing a guidance advising SPACs to account for equity warrants as debt, and later advising SPACs to treat “redeemable” shares as temporary or “mezzanine” equity. However, the value of a SPAC hinges more on how much it raised from investors than traditional IPOs, which are susceptible to the ups and downs of the market, explaining why in the current market the drop-off in SPAC activity is less than that of IPOs.
Also sobering for investors, the largest biotech electronic transfer fund (ETF)—the iShares Nasdaq Biotechnology ETF (IBB)—has fallen about 19% year over year, to just over $119 from $147, while the SPDR S&P Biotech ETF (XBI) has plummeted 40%, to $76.40 from $127.95.
While initially skeptical about merging with a SPAC, Teper said, he and Cytovia were reassured by the experience of Isleworth’s management team as much as by its largesse.
Isleworth’s chairman, Allen Weiss, capped a 39-year career at The Walt Disney Co. with a stint (2003-11) as President of World Wide Operations for Disney’s $10 billion, 95,000-employee Walt Disney Parks and Resorts business. Isleworth’s CEO, Robert Whitehead, is a career biopharma executive whose experience includes being co-founder and CEO of Sprout Pharmaceuticals and Slate Pharmaceuticals, as well as CEO of Prestwick Pharmaceuticals.
Been There, Done That
“The leaders of Isleworth are not just financial engineers. They’re corporate executives and entrepreneurs. They’ve been there and they’ve done that, mostly in the healthcare and biopharmaceutical setting, but some of them, even in corporate America and in the Fortune 50. So, they’ve been excellent partners to date, and we expect that they will continue to help us become a public company,” Teper said.
Isleworth raised $207 million when it went public on February 25 by selling 20.7 million units at $10 a unit (just above Isleworth’s closing price Friday of $9.94 a share). Each unit consisted of one share of common stock and half of a redeemable warrant entitling the holder to buy a share of common stock at $11.50 per share.
That $207 million cash is being held in Isleworth’s trust account and available for investment—assuming that no Isleworth stockholders exercise their redemption rights at closing, which would lessen the capital available to Cytovia.
“It is a good starting point,” Teper said of the $207 million.
In a presentation to investors, Cytovia disclosed a total $632 million in total sources of funding. In addition to the $207 million cash in trust, Cytovia listed:
- $285 million in equity to be rolled over to the new entity
- $40 million in equity from Isleworth
- $30 million in incremental convertible note proceeds to be sought after signing the BCA
- $20 million to be generated through conversion to equity of a convertible note from collaboration partner Cellectis.
Cytovia also plans to draw upon at least $20 million private investment in public equity (PIPE) by new investors. “We intend to pursue an additional $30 million of PIPE proceeds after the signing of the BCA [Business Combination Agreement] from investors with which we have pre-existing relationships,” Cytovia disclosed in an investor presentation.
“We believe that the combination of what is in trust and the money that’s being raised by the company will give us sufficient capital to fund for the next two years, until we have enough clinical data.”
Growing NK Space
The NK cell market is projected to grow from $1.585 billion this year to $2.793 billion by 2028, based on a compound annual growth rate of 9.9%, according to an Absolute Reports study published April 4.
Cytovia is among developers working to bring NK-based and other cancer-fighting cell therapies through clinical trials into approvals. Other companies in the growing NK space include Affimed, Artiva, Catamaran Bio, Dragonfly Therapeutics, Fate Therapeutics, Kiadis, Nkarta, oNKo-innate, and Shoreline Biosciences.
Nkarta shares more than doubled April 25, from $7.77 to $18.72, after reporting positive preliminary data from a pair of Phase I trials for its lead chimeric antigen receptor (CAR) NK cell therapy candidates, NKX101 and NKX019, in two distinct groups of hematologic malignancies.
In one trial (NCT04623944), 3 of 5 relapsed/refractory (r/r) acute myeloid leukemia (AML) patients achieved complete response with full hematologic recovery—a 60% CR rate—after a three-dose regimen of NKX101 consisting of 1 billion or 1.5 billion CAR NK cells per dose. Two of the three CR patients were minimal residual disease (MRD) negative.
In the second trial (NCT05020678), which assessed NKX019 in r/r B cell malignancies, 3 of 6 patients treated at the higher dose level in a three-dose regimen showed complete response (50% CR), including one patient with aggressive diffuse large B cell lymphoma (DLBCL) and one patient with mantle cell lymphoma (MCL).
Also last month, at the American Association for Cancer Research (AACR) Annual Meeting 2022, Affimed presented updated data from a Phase I/II trial (NCT04074746) of its lead innate cell engager (ICE®) AFM13 precomplexed with cord blood-derived natural killer (cbNK) cells in patients with CD30-positive relapsed or refractory Hodgkin and non-Hodgkin lymphomas. Data from 13 patients showed a 100% objective response rate (ORR) and a 62% CR rate at the recommended Phase II dose of 108 NK/Kg in 13 patients after 2 cycles of therapy.
Fate Therapeutics on Wednesday reported within its first quarter results that enrollment was ongoing in single- and multiple-dose, multi-cycle cohorts in its multi-center Phase I trial of FT596 in combination with rituximab (FT596+R) in relapsed or refractory (r/r) B cell lymphoma. Fate also said it was preparing to submit to the FDA in Q2 its clinical protocol for FT596+R-CHOP—the standard first-line immunochemotherapy for patients with aggressive lymphomas–in first-line aggressive lymphoma patients treated as outpatients in the community setting. Back in December, Fate reported positive interim Phase I data for its three single-dose escalation cohorts of FT596+R, showing that 11 of 16 patients (69) attaching an objective response, including nine patients (56%) who achieved a complete response on Day 29.
And last year, Shoreline last year inked two of the largest NK collaborations with biopharma giants to develop its iPSC-derived “intelligently engineered” NK cells and macrophages, which are optimized by applying gene editing to target specific genes with properties sought by the company. Shoreline launched an up-to-$2.3 billion partnership with Kite, a Gilead Company, and a potentially more than $1.3 billion alliance ($45 million upfront) with BeiGene.
Two INDs this year
Last month at AACR, Cytovia presented its first in vivo data showing anti-tumor activity for its Glypican-3 (GPC3) Flex-NK™ cell engager CYT-303 in combination with its induced pluripotent stem cell (iPSC)-derived natural killer or “iNK” cells in an animal model of hepatocellular carcinoma (HCC).
Cytovia’s all-preclinical pipeline is led by CYT-303 and the combination of CYT-303 with CYT-100, consisting of unedited iNK cells. Both programs are indicated for HCC and solid tumors—and both are poised to enter the clinic this year upon submission to the FDA of investigational new drug (IND) applications.
“The advantage of combining the two [CYT-303 and CYT-100] is that you’re addressing the deficiency in the number of functional NK cells in cancer patients,” Teper said.
“When you look at HCC, it’s a very prevalent disease. It cannot just be treated in academic centers. The opportunity for outpatient treatment is probably greater with NK cells than it is with T cells. It’s probably greater with NK engagers combined with NK cells,” Teper added. “If we demonstrate that this benefits earlier in the treatment, I think we’ll have a better chance to prolong the life of the patients.”
The unedited iNK cells are one of three types of iNK cells being developed by Cytovia. The company is also developing TALEN® gene-edited iNK cells with improved function and persistence, and TALEN® gene-edited iNK cells with chimeric antigen receptors (CAR-iNKs) to improve tumor-specific targeting.
“The next question is: is it better to have a gene edited CAR-NK or to have an NK engager cluster cell? The proof will be in the clinical trials,” Teper said.
In addition to its iNK cells, Cytovia is developing a second complementary cornerstone technology, namely a quadrivalent multifunctional antibody platform designed to engage natural killer cells by targeting NKp46 using Cytovia’s proprietary Flex-NK™ technology.
At AACR, Cytovia also presented its first in vitro data showing its CD38 Flex-NK™ cell engager (CYT-338), targeting the glycoprotein CD38, to have a favorable profile compared to Janssen Biotech (Johnson & Johnson)’s Darzalex®(daratumumab), indicated for forms of multiple myeloma and also targeting CD38.
Darzalex generated $6.02 billion in sales for J&J last year, up 44% from 2020, and another $1.856 billion in the first quarter of this year, up 36% from Q1 2021. The global myeloma market is projected to inch up to $20 billion by 2027, according to a report released last week by iHealthcareAnalyst, which would place that market’s current value at about $19.88 billion.
“We have additional in vivo data to be presented at an upcoming scientific meeting,” Teper said. “We will be progressing it [CYT-338], but our priority, where we’re prioritizing resources is the GPC3 HCC program. We’re targeting two INDs this year and the other INDs throughout 2023.
Moving Beyond Virtual
Founded in 2019, Cytovia has grown from a virtual company last year to approximately 40 employees. More than half of them (25) are based in the company’s R&D lab in Natick, MA, which Cytovia is outgrowing.
“The financing that we’re seeking will also support us moving in 2023 to a larger facility in the Boston area. And depending on how much financing we have, I think we could double the research staff,” Teper projected.
In coming months, Cytovia plans to manufacture clinical cell products using Poseidon Biotech’s cGMP manufacturing site in Puerto Rico.
“We’ll leverage the fact that they [Poseidon] had a bigger facility. We’re completely autonomous in terms of our clean rooms, our process development lab. But we benefit from the broader infrastructure,” Teper said. “It’s a new business model in between the CDMO and building your facility from scratch. I think the partnership between Cytovia and Poseidon Bio has accelerated our independence in manufacturing. And we’ve been able to do it cost effectively.”
Cytovia’s pipeline lists up to four programs potentially advancing to IND applications in 2023. Two of the programs target GPC3 in treating HCC and solid tumors:
- CYT-303 plus CYT-150 consisting of edited iNK cells
- CYT-503, consisting of CAR-iNK cells
The other two potential 2023 programs are CYT-538, another CAR-iNK cell therapy candidate but targeting CD38 to treat multiple myeloma; and CYT-501, a dual-targeted (EGFRvIII and EGFR wild-type) CAR iNK-cell therapy indicated for glioblastoma and solid tumors.
“When we started the company in 2019, we thought that NK cells were premises of interest, but they were being overlooked. I think our intuition was right, because just a few months after we started the company, Fate [Therapeutics] had initial clinical data. Katy Rezvani [MD, PhD] at MD Anderson [Cancer Center] published on the first CAR NK in The New England Journal of Medicine, and things have been accelerating in NK ever since.”
Rezvani was corresponding author, joining colleagues in publishing data in February 2020 from a Phase I/II trial (NCT03056339) showing that treatment with cord blood-derived CAR NK cell therapy targeting CD19 resulted in clinical responses in a majority of patients with relapsed or refractory non-Hodgkin’s lymphoma (NHL) and chronic lymphocytic leukemia (CLL), with no major toxicities seen.
Of the study’s 11 patients, eight responded to therapy, of whom seven achieved a complete response at a median follow-up of 13.8 months.
Teper said Cytovia is well positioned among NK cell therapy developers because its pipeline includes NK engagers, unedited NK cells, edited NK cells, and gene edited CAR-iNK NK cells: “We can basically test each of them, and see which patients respond better at what stage of the disease.”