Flex Pharma lost two-thirds of its market capitalization after saying today it will eliminate approximately 60% of its workforce—about a dozen staffers—explore a possible sale of the company among strategic alternatives, and terminate Phase II clinical trials of its lead candidate FLX-787 in amyotrophic lateral sclerosis (ALS) and Charcot-Marie-Tooth (CMT).
Investors responded to the company’s news this morning with a selloff that sent Flex Pharma’s share price plunging 66% in premarket trading on the NASDAQ Global Market as of 9:29 am, to $1.41 from $4.18 at yesterday’s close.
The selloff followed Flex Pharma’s announcement that it will cut costs by restructuring its workforce—which as of March 2 consisted of 20 full-time and two part-time staffers, according to the company’s Form 10-K Annual Report for 2017, filed March 7.
“The majority of the reduction in personnel (is) expected to be completed by June 30, 2018,” with savings expected as soon as the third quarter, Flex Pharma stated today in a regulatory filing, adding: “The Company estimates that it will incur one-time costs of approximately $0.8 million to $1.1 million in the form of termination benefits related to the restructuring plan.”
Flex Pharma added that its board on June 8 hired Wedbush PacGrow as a strategic financial advisor and formed a committee that will work with company management to oversee its review of strategic alternatives.
“The Board and management team have initiated a process to explore a range of strategic alternatives for enhancing stockholder value, including the potential sale or merger of the Company,” Flex Pharma stated.
The layoffs and strategic review followed Flex Pharma’s decision to end Phase II trials of FLX-787 in ALS and CMT. The company cited unspecified “oral tolerability concerns” observed in both studies in a subset of patients being treated with the oral disintegrating tablet formulation at 30 mg, taken three times a day.
“In the past few months we have reported positive efficacy data in two serious and distinctly different neurological diseases: multiple sclerosis (MS) and ALS. We believe that these clinical data demonstrate the clear potential of FLX-787 as a symptomatic therapy to reduce painful cramps and spasms in these patient populations,” Bill McVicar, Ph.D., president and CEO of Flex Pharma, said in a statement.
More Studies Required
“However, recent observations of oral intolerability at the current dose and formulation, in a subset of patients, in both studies, indicate that more formulation and dose-ranging studies are required, which is challenging for the Company based upon our current resources,” Dr. McVicar added.
In November, Flex Pharma trumpeted positive topline data in a randomized, double-blinded, placebo-controlled, cross-over Australian trial in ALS patients with frequent muscle cramps.
Despite the positive results, the company terminated the Australian study early, saying it needed to focus its limited resources on its U.S. Phase IIb COMMEND trial (NCT03196375), designed to assess the ability of FLX-787 to reduce fasciculations in ALS patients. COMMEND was designed to recruit approximately 120 participants in approximately 30 study centers across the U.S.
COMMEND is one of two active-until-now trials assessing FLX-787 for its ability to reduce fasciculations in ALS patients, according to ClinicalTrials.gov. The other is the Phase I/II study FLX-787-107 (NCT03334786). A third Phase I/II trial for the same drug in the same indication, FLX-787-106 (NCT03338114), was withdrawn by company decision as of January 23.
FLX-787 has been under study in CMT in the Phase II COMMIT trial (NCT03254199), which was designed to recruit approximately 120 participants in 20 study centers across the U.S.
In today’s announcement, the company said it will continue to operate with its shrunken staff during the internal review as it continues assessing FLX-787 for a third indication, dysphagia, and operates its HOTSHOT sports nutrition drink, designed to prevent and treat muscle cramps in endurance athletes.
Flex Pharma also disclosed today that it terminated its CMO, Thomas Wessel, M.D., Ph.D., but named him an outside advisor to the company during its strategic review process, effective June 26.
Under a separation agreement with Flex Pharma, the company will pay Dr. Wessel a lump sum payment equal to nine months’ base salary, totaling $257,250, following his termination date, as well as a portion of his monthly COBRA insurance payments over a nine-month period following his termination date. His vested stock options will be exercisable for a period of one year after termination of the Advisor Agreement, which either he or Flex Pharma may terminate upon 30 days' notice.