Molecular Templates will merge with a wholly owned subsidiary of Threshold Pharmaceuticals in an all-stock deal designed to create a combined developer of novel cancer treatments, the companies said today.

Under the reverse merger, current Molecular Templates shareholders would own approximately 65.6% of the combined company, with the remaining 34.4% owned by shareholders of publicly traded Threshold. The combined company will be publicly owned and will trade its stock on NASDAQ Capital Market under the symbol MTEM, with Threshold changing its name to Molecular Templates.

The merger comes nearly 6 months after Threshold acknowledged that its cancer candidate tarloxotinib met its primary interim response rate endpoint in patients with recurrent or metastatic squamous cell carcinoma of the skin—but not in patients with metastatic squamous cell carcinoma of the head and neck, or patients with advanced epidermal growth factor receptor (EGFR)-mutant, T790M-negative non-small-cell lung cancer.

Following that Phase II setback, Threshold eliminated about one-quarter of its workforce. Among those leaving the company were COO Stewart M. Kroll and members of the biostatistics and data management group.

The combined company would have two clinical-stage compounds. One is Molecular Templates’ lead product candidate MT-3724, an engineered toxin body designed to target the CD20 cell-surface antigen present in various lymphomas and leukemias. According to Molecular Templates, a Phase I trial assessing MT-3724 in relapsed and refractory non-Hodgkin’s lymphoma has demonstrated good safety and efficacy in elderly, heavily pretreated patients.

The other clinical-stage compound, evofosfamide (formerly TH-302), is Threshold’s hypoxia-activated prodrug of a bis-alkylating agent that is preferentially activated under severe hypoxic tumor conditions, a feature of many solid tumors. A Phase I clinical trial evaluating evofosfamide in combination with Bristol-Myers Squibb’s marketed immune checkpoint antibody Yervoy® (ipilumumab) is about to commence at the MD Anderson Cancer Center in Houston Texas, Threshold says.

In addition to MT-3724, Molecular Templates has pursued preclinical programs targeting human epidermal growth factor receptor 2 (HER2) and programmed death-ligand 1 (PD-L1). The company has received $15.2 million in new funding commitments from The Cancer Prevention and Research Institute of Texas (CPRIT) for its program targeting CD38 and previously won a CPRIT grant for $10.6M that has funded development of MT-3724.

“The merger of our two companies provides Threshold shareholders with a significant equity stake in a biopharmaceutical company with a promising cancer therapy, MT-3724, as well as an innovative and unique technology platform that has generated preclinical drug candidates to treat multiple myeloma, breast cancer, and melanoma,” Threshold CEO Barry Selick, Ph.D., said in a statement.

Dr. Selick will serve as chairman of the combined company, whose CEO will be Molecular Templates CEO Eric Poma, Ph.D. The combined company would be overseen by a seven-member board—two representatives of Molecular Templates, two of Threshold, and three to be mutually agreed upon by Molecular Templates and Threshold.

Under the merger, venture capital firm Longitude Capital will invest $20 million at the close of the transaction, subject to conditions that include receipt of additional equity financing commitments of $20 million.

Concurrent with the merger agreement, Threshold disclosed that it made a $2 million bridge loan to Molecular Templates. Should the merger not close by May 31, Threshold has agreed to make available further funding of up to $2 million on the same terms upon mutual agreement.

The merger has been approved by the boards of both companies and is expected to close in the second quarter, subject to approval by shareholders of each company and other customary conditions.

Previous articleAutism Blood Test Incorporates Big Data Techniques
Next article10 Takeover Targets for 2017