7 PRODUCT DEVELOPMENT:CIRCUIT LOGIC

9 EMERGING COMPANY PROFILE:MICROBIOTAL REVERSE-ENGINEERING

10 REGULATION:GANGING UP IN RARE DISEASE

13 EBB & FLOW:GOING WITH THE FLOW

SHOW US YOUR SHORTSBY AMRAN GOWANI, SENIOR EDITOR, RESEARCH &

ANALYTICS

Absent any data showing a sustained impact of manipulative short selling on biotech valuations or their ability to raise capital, it is difficult to discern what direct benefit biotech companies would gain from BIO’s call for short sale disclosures. It does, however, appear that long investors could benefit from reduced volatility in stocks they hold.On the flip side, certain shorts could be forced to rethink their tactics, possibly including the need to take on more risk.On July 18, BIO presented to the House Financial Services Committee’s subcommittee on capital markets, securities and investment as part of a hearing titled “The Cost of Being a Public Company in Light of Sarbanes-Oxley and the Federalization of Corporate Governance.”The hearing’s goal was to examine factors that influence a U.S. company’s decision to go public, along with the challenges they face as publicly traded companies.Among other proposals for reducing the burden of being a small public company, BIO proposed that short sellers should be required to disclose positions that cross yet-to-be-defined percentages of shares outstanding or volume.BIO argued that “manipulative short sellers” and the strategies and tactics they employ are especially harmful to capital formation in the biotech industry given the hefty capital requirements and the long timelines needed to develop drugs.Activist short sellers come in a variety of flavors, but their general approach is to accumulate a short position and then drive down the share price of the target company via public dissemination of their bear thesis.

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BlackThorn is testing whether an informatics platform to link neurobehavioral symptoms to neural circuits can enrich trials for responders.

Finch is using clinical data from fecal transplants to develop a full-spectrum oral therapeutic targeted to the colon for C. difficile infection.

Regulators’ proposed platform trial design for pediatric Gaucher’s could apply to other rare diseases, if logistical hurdles can be overcome.

Canaan Partners to back more biopharmas with $800 million fund. Plus: infectious company VenatoRx woos its first institutional investors; and Effector finds partner, investor in Pfizer.

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Not all short sellers are activists, and those who are can play an important role in taking management to task for hyping their companies, corporate malfeasance or otherwise failing to act in the interests of shareholders.But some short sellers can and do disseminate damaging rumors and even falsehoods about the companies they target in hopes of driving down the shares and reaping a quick profit.John Blake, SVP of finance at aTyr Pharma Inc., presented on behalf of BIO. In his testimony he said the impact of these abusive short selling behaviors is exacerbated by the fact that current regulations do not require short positions to be publicly disclosed.By contrast, current SEC rules require that long positions be publicly disclosed once an owner acquires 5% or more of a company’s outstanding shares.Blake said this “information asymmetry” harms issuers, investors and patients by disincentivizing capital flows to public biotech companies.The trade group didn’t provide any data showing that investment in the biotech space has been reduced as a result of abusive short selling practices. Nor did BIO highlight any specific examples of biotechs that were materially harmed by such short selling activities, either to Congress or to BioCentury.Nonetheless, BIO said short sale disclosure rules “would shine a light on manipulative behaviors” and thus mitigate their impact.Longs told BioCentury that even though they tend to dismiss such attacks, increased transparency in the markets is always a good thing and additional disclosures would help protect less sophisticated shareholders.

And it is logical to think the ability of existing shareholders to contextualize a short seller’s thesis — namely by identifying who’s on the other side of the bet and assessing the magnitude of their stake — could help reduce share price volatility and prevent market overreactions.Some types of short sellers could be forced to modify their tactics. Activist shorts would need to build positions large enough to persuade the market that it should take their bets seriously. They also would have to craft and communicate strong theses against their target companies.

NOT A BAN

Blake and BIO’s Charles Crain told BioCentury that BIO’s proposal is solely focused on transparency in the public markets and is not about limiting or barring short sales.“It’s really an issue about transparency and seeing if you could potentially expose some of these bad actors,” Blake said.Crain, director of tax & financial services policy at the trade group, said Hayman Capital Management is a prime example of the type of activist short selling behavior that BIO hopes to expose. Hayman has repeatedly used the inter partes review (IPR) process to challenge drug patents as part of what was widely reported to be a short strategy. Hayman did not respond to BioCentury’s interview requests. To date, the strategy has resulted in immediate share declines for some companies, but these were usually modest and transient (see “IPR Chronicles”).Blake also said enacting short disclosure rules would further increase investment in the biotech ecosystem, but did not quantify the potential

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impact. “I think the argument is that it can be even better without this particular vulnerability,” he said.Money raised by U.S. biotechs via IPOs and follow-ons reached an all-time high of $22.6 billion in 2015. Despite a significant political overhang last year, 2016 saw $10 billion raised through the public markets — the fifth highest total ever. And 2017 is currently on pace to see $16.4 billion in capital raised, which would be the second best year in the industry’s history.David Tawil of Maglan Capital challenged the notion that short sellers have curtailed investment in the biotech sector. Maglan is an event-driven hedge fund. Such funds typically seek to exploit price inefficiencies arising from corporate events such as bankruptcy, financial restructuring or M&A.He acknowledged that some companies could be forced to raise capital at depressed equity prices due to shorts, but said the onus was on the companies to manage their capital efficiently.Sector specialists also doubt new disclosure rules would lead to increased investment in the biotech arena, and they certainly don’t expect companies to face fewer short selling attacks as a result.“I have never not invested because of noise,” noted LSP’s Joep Muijrers.“At the end of the day, if you as a company achieve your milestones in a successful way, short sellers will hurt and they’ll go away,” he added.BioCentury’s own analysis of a basket of companies targeted by short sellers suggests that after an initial shock, fundamentals dictate where the company’s stock heads next. Those with positive catalysts more than recovered any lost value. Companies that declined further generally succumbed to preexisting issues that would have been their undoing anyway (see “When Shorts Attack”).Omega Funds’ Otello Stampacchia added, “If the objective of this provision is to scare dedicated short strategists or investors that could short into not shorting, I don’t think it’s going to work.”

BETTER DEFENSE

BIO’s claim that more public information would help biotech companies better navigate the challenges of a short attack was better received by members of the investment community.

IPR CHRONICLESHedge fund operator Kyle Bass’ Coalition for Affordable Drugs filed inter partes reviews (IPRs) against at least six small- and mid-cap biotechs throughout 2015. Most were resolved in 2016 and 2017. An analysis of the four companies Bass challenged that remain independent shows macroeconomic conditions and company fundamentals played a much more important role in equity values over the 2.5-year period, regardless of the outcome of the IPR challenges.

The chart below shows selected events affecting stock prices of Acorda Therapeutics Inc. (NASDAQ:ACOR), Jazz Pharmaceuticals plc (NASDAQ:JAZZ), Insys Therapeutics Inc. (NASDAQ:INSY), and Aralez Pharmaceuticals Inc. (NASDAQ:ARLZ; TSX:ARZ) (Pozen Inc. at the time of filing). IPR-related events are labeled in red; Source: Yahoo! Finance, USPTO and FDA’s Orange Book

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Acorda

A. 2/10/15-2/27/15 - Two IPRs filed against patents covering MS drug Ampyra dalfampridine

B. 8/24/15 - USPTO Patent Trial and Appeal Board (PTAB) denies Ampyra review

C. 9/2/15-9/3/15 - Three more IPRs filed against patents covering Ampyra

D. 10/5/15 - Settles patent litigation with Actavis, now a subsidiary of Teva Pharmaceutical Industries Ltd. (NYSE:TEVA; Tel Aviv:TEVA), on Ampyra, delaying a generic until 2027

E. 1/19/16 - Acorda announces plans to acquire Biotie Therapies Corp.

F. 3/9/17 - PTAB upholds Ampyra patents

G. 3/31/17 - District court invalidates four of five Ampyra patents; the remaining patent expires in July 2018

Jazz

H. 4/6/15 - IPR filed against patents covering narcolepsy drug Xyrem sodium oxybate

I. 10/15/15 - USPTO PTAB denies Xyrem review

J. 5/31/16 - Announces plans to acquire Celator Pharmaceuticals Inc.

K. 1/17/17 - FDA grants Jazz Citizen’s Petition, refusing to approve Xyrem generics without REMS; FDA also approves a generic from the Roxane Laboratories Inc. unit of Hikma Pharmaceuticals plc (LSE:HIK)

L. 4/5/17 - Jazz settles patent litigation and grants Hikma rights to market an authorized generic of Xyrem beginning Jan. 1, 2023

Pozen/Aralez

M. 5/21/15-6/5/15 - Two IPRs filed against patents covering combination NSAID/proton-pump inhibitors Vimovo esomeprazole/ naproxen and Yosprala aspirin/ omeprazole

N. 6/8/15 -Announces plans to acquire Tribute Pharmaceuticals Canada Inc.; the combined company becomes Aralez in February 2016

O. 8/7/15-8/12/15 Two additional IPRs filed against Vimovo patents

P. 12/8/15-12/17/15 - PTAB denies review of two challenges to Vimovo and Yosprala patents

Q. 2/11/16 - PTAB denies review of one additional challenge to a Vimovo patent

R. 3/15/16 - In 2Q15 earnings, discloses resubmission of Yosprala NDA after resolving manufacturing deficiencies

S. 9/15/16 - FDA approves Yosprala for secondary prevention of cardiovascular and cerebrovascular events

T. 2/21/17 - PTAB upholds remaining challenged Vimovo patent

Insys

U. 8/24/15 - Three IPRs filed against patents covering pain drug Subsys fentanyl

V. 12/3/15 - Southern Investigative Reporting Foundation (SIRF) publishes first part of investigation into sales and marketing practices

W. 3/10/16 - PTAB declines to institute all three IPR reviews

X. 3/23/16 - Insys receives 3-month PDUFA extension for Syndros oral cannabidiol solution

Y. 4/11/16 - Insys guides to 1Q16 Subsys revenues much lower than consensus estimates

Z. 12/8/16 - DoJ charges ex-Insys executives in racketeering scheme

AA. 5/9/17 - Media reports suggest Insys is in talks to settle DoJ probe

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“Our hope is that having transparency gives our companies the tools to combat those sorts of rumors,” said Crain.Tawil agreed. He noted management teams tend to be caught flat-footed by activist shorts who remain invisible until just before launching their attack. “They don’t teach this in CEO school,” he said.Ted Allen, VP of strategic communications at the National Investor Relations Institute (NIRI), added that companies in the dark about who’s behind an attack frequently struggle to provide timely information to their shareholders.Both thought if managements could see that a short position was being built against their company’s stock, they would be better positioned to prepare a defense.Companies also could warn investors and analysts in advance of a short seller’s pending campaign, reducing the panic typically associated with surprise attacks.“It’s about leveling the playing field,” Tawil said.

Muijrers added that disclosure could have the benefit of allowing CEOs to identify and talk to shorts about their concerns. “If you’re a CEO and you know there’s a significant short position out there, you know who to talk to,” he noted.

WHO BENEFITS?

The consensus view is that long investors would see tangible benefits if disclosure rules were enacted, because increased transparency on the short side would lead to reduced volatility on the long side.Crain and Tawil both noted that simply identifying who is on the short side of the bet would allow long investors to ascertain what the firm’s strategy is and analyze behavior patterns based on prior short campaigns.Gauging the absolute size of the short would let longs assess how credible a short’s thesis is. “If you make a huge bet, it’s a lot more meaningful than a 2.5% short,” said Tawil.He added that in cases where the short has publicly disclosed its assets under management,

longs also could determine the relative risk that a short is assuming and assess their level of conviction.“If 20% of the firm’s assets are into the deal, you know it’s a big deal,” said Tawil.He said knowing whether the short is acting alone or in concert, whether they used to be long on the same stock, and what their other short bets are would help a company’s current owners assess the magnitude of the threat.He added that even for sophisticated and disciplined investors, volatility poses a major threat because algorithmic trading programs can be automatically triggered to sell stocks once predetermined thresholds are surpassed.In such a scenario, equity prices can plummet for reasons completely unrelated to fundamentals and, in some cases, may fail to return to former values.“All of these investors are harmed whether they’re super sophisticated or unsophisticated,” said Tawil. “It’s not about them, it’s about the price of the security.”

WHEN SHORTS ATTACKWhile some activist short sellers have been successful in creating short-term declines in the stocks they’ve targeted, fundamentals continue to rule the day. Seven companies targeted by short sellers and analyzed by BioCentury declined in value the day the short campaign was made public. Three have since seen their stocks increase 15% or more, and two of those went on to raise money via follow-ons.

Gene therapy developer AveXis Inc. (NASDAQ:AVXS) is the standout, climbing 79% since Citron Research issued a report last December saying the stock would be worth $9 in one year’s time. AveXis reported positive Phase I data for AVXS-101 in spinal muscular atrophy type 1 on March 16 and raised $269.8 million in an upsized offering on June 20.

Exact Sciences Corp. (NASDAQ:EXAS) gained 17% on reimbursement and earnings news. The company’s Cologuard cancer diagnostic received expanded access from UnitedHealth Group Inc. (NYSE:UNH) two weeks after Citron said the biotech’s stock could go to $0 within three to five years. Exact raised $245 million on June 7 and bested analyst estimates when it reported Q2 earnings on July 25. Prothena Corp. plc (NASDAQ:PRTA) has gained 15% on no news since Muddy Waters issued a report questioning the biotech’s data.

The company that has suffered most among those targeted by activists shorts is Valeant Pharmaceuticals International Inc. (TSX:VRX; NYSE:VRX), whose stock has declined 89% since Citron accused it of “phantom sales” in an October 2015 report. While Valeant did not commit accounting fraud, a host of other issues including improper reimbursement practices, regulatory investigations, management turnover and debt service challenges all contributed to the stock’s fall. (A) Aclaris Therapeutics Inc. (NASDAQ:ACRS) raised $20 million via a prearranged common stock sales program the same day the short report was issued; (B) Mallinckrodt plc (NYSE:MNK) has been targeted by Citron on three separate occasions, in November 2015, November 2016 and June 2017; Sources: BioCentury Online Intelligence, company reports, short seller reports

Company Activist short Short thesis Report date Prior close Report close (% chg)

7/28 close (% chg)

Prothena Corp. plc (NASDAQ:PRTA) Muddy Waters Misleading clinical data 6/29/17 $55.15 $54.45 (-1%) $63.46 (15%)

Omeros Corp. (NASDAQ:OMER) Art Doyle Clinical fraud 6/28/17 $22.47 $20.34 (-9%) $21.71 (-3%)

Exact Sciences Corp. (NASDAQ:EXAS) Citron Inferior technology, valuation 5/15/17 $33.77 $32.43 (-4%) $39.47 (17%)

Aclaris Therapeutics Inc. (NASDAQ:ACRS) (A) Art Doyle Inferior technology, weak IP 4/21/17 $32.23 $30.22 (-6%) $28.65 (-11%)

AveXis Inc. (NASDAQ:AVXS) Citron Misleading clinical data, valuation 12/14/16 $51.32 $50.11 (-2%) $92.00 (79%)

Mallinckrodt plc (NYSE:MNK) (B) Citron Price gouging, business fraud 11/9/15 $69.89 $58.01 (-17%) $45.90 (-34%)

Valeant Pharmaceuticals International Inc. (TSX:VRX; NYSE:VRX)

Citron Accounting fraud 10/21/15 $146.74 $118.61 (-25%) $16.84 (-89%)

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NIRI believes all long investors would benefit from greater transparency around short selling, and that improved disclosure would “particularly benefit” index funds and their retail investor beneficiaries due to the passive nature of their holdings, Allen said in an email.

SHORT SHIFT

Disclosure requirements likely wouldn’t change the tactics or behaviors of so-called conviction shorts, who place bets against companies based on an analysis of fundamentals. “It probably wouldn’t change our strategy, but that’s because we’re activists and usually tell the market when we’re short anyway,” Carson Block told BioCentury in an email. Block is CEO of Muddy Waters Research, which sits in the conviction camp.And Tawil isn’t convinced disclosures would deter the type of attack Hayman is accused of, because the firm is ostensibly putting real capital to work and its approach involves exploiting a legal framework.Activists who rely on short-term volatility to make a profit, however, would likely need to recalibrate their tactics. Those with positions too small to tip the disclosure requirement would necessarily be expected to improve the quality of their bear arguments, because flashy takes without real money behind them would be easier for shareholders to shrug off.For activist shorts who are putting real cash at stake, timing their attacks would become a much more important consideration. The reason is that crossing the disclosure threshold could tip off the market that an attack is coming, and reduce the volatility associated with the launch of their campaign.Multiple investors also noted that once shorts trip the disclosure requirement, it could be harder for them to borrow additional shares to increase their positions. In fact, longs could intentionally increase their buying, forcing the shorts to cover their positions.And while Muijrers thought disclosures could increase dialogue between shorts and managements, Block disagreed.“The damage would be to non-activist long/short managers and short only managers who would of course have their access to company managements greatly curtailed, further tilting what is already an uneven playing field,” Block wrote to BioCentury.

In a commentary published on HFM’s Absolute Return website on July 7, Jack Inglis, CEO of the Alternative Investment Management Association (AIMA), said investors who are merely suspected of being shorts may be denied access.“They can be refused access to issuers’ senior management even if it is unclear if they ultimately intend to buy or short the stock,” he wrote.HFM is a professional association for hedge fund managers. AIMA declined to be interviewed for this story.

WHO’S ON FIRST?

A bigger question is whether the SEC can be persuaded to act on BIO’s or any other proposals pertaining to short disclosures.The issue has been debated for quite some time, particularly in the wake of the 2008 financial crisis. The SEC went as far as instituting a temporary ban on short sales in financial stocks at the height of the crisis in an attempt to calm the markets.The 2010 Dodd-Frank Act called for the SEC to regulate short sales and establish disclosure rules.According to the legislation: “The Commission shall prescribe rules providing for the public disclosure of the name of the issuer and the title, class, CUSIP number, aggregate amount of the number of short sales of each security, and any additional information determined by the Commission following the end of the reporting period. At a minimum, such public disclosure shall occur every month.”A 2014 SEC report, which was required by the Dodd-Frank law, concluded that implementing a real-time reporting system for short sale transactions would not be cost effective. The

analysis was conducted by the Division of Economic and Risk Analysis (DERA).Neither SEC nor DERA has produced any subsequent analyses of the topic.None of the parties who spoke to BioCentury are sure what’s holding up the SEC. And several said lobbying efforts against the implementation of short disclosures have not materialized, suggesting a lack of organized opposition.Meanwhile, support for a disclosure requirement appears to be mounting.NYSE and NIRI jointly petitioned the SEC to require short disclosures in October 2015, and in December that year Nasdaq Inc. submitted a petition of its own. BIO commented on the proposals in March 2016, and a host of politicians and corporations have requested that the SEC take action as well. Most recently, Sens. Robert Menendez (D-N.J.), Jeff Merkley (D-Ore.) and Tammy Baldwin (D-Wis.) filed a comment on Jan. 9.Crain acknowledged that changing SEC rules is a challenging process, and said BIO’s initial goal is to create dialogue to highlight the importance of the issue.NIRI said the lack of SEC action on this issue is “regrettable,” especially since Dodd-Frank has been law for seven years.On the other hand, none of the parties who petitioned the SEC made specific recommendations for what should trigger the disclosure requirement. BIO’s proposal supported a disclosure trigger when an unspecified percentage lower than 5% of a company’s stock is sold short.Neither BIO nor any of the other parties who spoke to BioCentury had a view as to what the absolute figure should be, however. NYSE did not respond to inquiries.BIO’s proposal also floated the idea of triggering a disclosure if the number of shares sold short exceeded a certain percentage of average trading volume. BIO did not say what that threshold should be, and buysiders were skeptical of how this could be implemented, given that trading volume is a highly variable metric and remaining in compliance could be untenable for investors.Europe has a disclosure system in place.In 2012, the EC enacted regulation No. 236/2012, which requires short positions to be disclosed to the relevant authorities for

“IT’S REALLY AN ISSUE ABOUT TRANSPARENCY AND SEEING IF YOU COULD POTENTIALLY EXPOSE SOME OF THESE BAD ACTORS.”JOHN BLAKE, ATYR

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all shares trading on an EU venue once they reach 0.2% of a company’s issued share capital. Additional disclosures are required for every 0.1% increase above that as well.The law also requires public disclosure of short positions once they reach 0.5% of a company’s issued share capital and again for every 0.1% increase above that.Disclosure is required the following trading day.

COMPANIES AND INSTITUTIONS MENTIONED

Alternative Investment Management Association (AIMA), London, U.K.

aTyr Pharma Inc. (NASDAQ:LIFE), San Diego, Calif.

Biotechnology Innovation Organization (BIO), Washington, D.C.

Hayman Capital Management L.P., Dallas, Texas

HFM, London, U.K.

Muddy Waters Research, San Francisco, Calif.

Nasdaq Inc. (NASDAQ:NDAQ), New York, N.Y.

National Investor Relations Institute (NIRI), Alexandria, Va.

New York Stock Exchange (NYSE), New York, N.Y.

Securities and Exchange Commission (SEC), Washington, D.C.

REFERENCES

Inglis, J. “Short-sighted on short-selling: Not so ‘icky’ after all.” Absolute Return (2017)

Lawrence, S. “Triple threat.” BioCentury (2009)

Lawrence, S. “Shaking in their shorts.” BioCentury (2008)

Usdin, S. “SCOTUS to the rescue?” BioCentury (2016)

Usdin, S. “Cut bait” BioCentury (2015)

Usdin, S. “Reforming IPR.” BioCentury (2015)

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PRODUCT DEVELOPMENT

CIRCUIT LOGICBY EMILY CUKIER-MEISNER, SENIOR WRITER

BlackThorn Therapeutics Inc. has begun the first of a series of studies that will test whether it can solve a tough problem in neurological drug development: the tendency of heterogeneity among patients with the same clinical diagnosis to mask the effects of compounds in clinical trials.The company has developed an informatics platform called INFORM to identify the neural circuits that drive neurobehavioral symptoms, select targets expressed within those circuits, and identify patient populations likely to respond to therapies against those targets.The platform uses algorithms to analyze structural and functional MRI imaging along with observational clinical data to determine the locations of circuits in the brain that govern behaviors.The approach will move the company away from classical disease definitions like “depression,” and toward targeting a specific symptom that could occur in patient subgroups across several indications, for example, cognitive dysfunction or anhedonia (the inability to feel pleasure).On July 24, BlackThorn began enrollment in a Phase IIa study of lead program BTRX-246040, an antagonist of opioid related nociceptin receptor 1 (OPRL1; NOPR) licensed from Eli Lilly and Co. BlackThorn plans to develop the compound to treat anhedonia in patients with major depressive disorder (MDD), obsessive-compulsive disorder (OCD) or Parkinson’s disease.Lilly tested BTRX-246040 in a pair of Phase II trials to treat MDD and alcohol use disorder. Both failed, but BlackThorn CSO Bill Martin said there was a “modest benefit” in the Phase II program overall that appeared to be driven by subpopulations of responders.BlackThorn said INFORM has shown that OPRL1 resides within a neural circuit that is responsible for anhedonia. The company’s hypothesis is that the nociceptin peptide is responsible for misregulating the circuit, and that inhibiting nociceptin receptors will restore circuit regulation as well as reward motivation.BlackThorn in-licensed exclusive worldwide rights to the compound last year. Terms are undisclosed.The Phase IIa trial is enrolling patients with MDD and is expected to complete in 2018, according to ClinicalTrials.gov.

INFORMED CONTENT

BlackThorn’s general approach to neurologic drug development is to start with a symptom of interest, use INFORM to find a circuit that governs it, then look for targets for drug discovery that reside within that circuit. INFORM starts with a knowledge base that includes publicly available clinical neuroimaging data and data from BlackThorn’s own prospective observational studies in patients and healthy volunteers.

BlackThorn uses algorithms developed with an undisclosed academic collaborator to analyze clinical, imaging and quantitative behavioral data in the knowledge base to find circuits that are activated or misregulated in patients with the symptom of interest.“Behaviors that have previously been reported subjectively in fact can be almost observed via patterns of brain activity,” said Martin. The company then looks at gene expression patterns within that circuit to identify targets that could modulate it.Martin said INFORM had to incorporate advances in both imaging technology and quantitative behavioral measures to pinpoint the circuit locations precisely enough for drug discovery.The company’s neuroimaging techniques include parcellation, which classifies portions of the brain into discrete segments based on a common function, and functional neuroimaging, which identifies changes in regional brain activity while a person is engaged in a task or behavior.The quantitative behavioral measures include tasks that are administered in a clinic and scored objectively, as well as passively collected data like digital biomarkers. Digital biomarkers are measurements captured continuously by mobile devices — such as a speech pattern that could signify a mental state like depression.

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Once BlackThorn has identified its target and has a drug candidate, it can identify likely responders based on presence of the symptom of interest, and assessment of related behavioral tasks or neuroimaging patterns.

FIRST TEST

Martin said BlackThorn had a general interest in OPRL1 modulation because it could treat several neurobehavioral disorders, and saw the Lilly program as an opportunity to test one specific application of INFORM: developing a profile for responders based on biologic or behavioral markers.That work started by trying to connect clinical observations to a dysregulated biologic circuit. BlackThorn did so by performing its own analysis of data from the Lilly trials and combining that information with the INFORM knowledge base. Martin declined to say what types of data from the BTRX-246040 trials went into the analysis, but he said the trials did not include neuroimaging.Martin said BlackThorn concluded that the OPRL1 receptor is expressed within a brain circuit related to reward processing that can produce anhedonia when misregulated.BlackThorn’s Phase II program will include several quantitative behavioral assessments of anhedonia; the company hopes one or more of them can be used to identify responsive patients.The quantitative assessments include behavioral biomarkers of cognition collected continuously using smartphone technology from Mindstrong

Health; analyses of vocal samples for markers of mood, affect and cognitive function conducted using software from Canary Speech LLC; and the Facial Expression Recognition Task (FERT) from P1vital Products Ltd. to detect changes in emotional bias.BlackThorn also has a pipeline of G protein coupled receptor modulators that it is building through deals and in-house small molecule discovery. BTRX-335140 and BTRX-395750 are both kappa opioid receptor (KOR; OPRK1) antagonists in preclinical testing. BlackThorn licensed both from The Scripps Research Institute for undisclosed terms.Martin said KOR modulation could regulate circuits involved in either reward processing or cognition, but did not name indications or symptoms BlackThorn will study. BlackThorn plans to bring a KOR antagonist into the clinic next year.The company has additional unnamed preclinical programs against two undisclosed targets.

COMPANIES AND INSTITUTIONS MENTIONED

BlackThorn Therapeutics Inc., South San Francisco, Calif.

Canary Speech LLC, Spanish Fork, Utah

Eli Lilly and Co. (NYSE:LLY), Indianapolis, Ind.

Mindstrong Health, Palo Alto, Calif.

P1vital Products Ltd., Wallingford, U.K.

The Scripps Research Institute, La Jolla, Calif.

“BEHAVIORS THAT HAVE PREVIOUSLY BEEN REPORTED SUBJECTIVELY IN FACT CAN BE ALMOST OBSERVED VIA PATTERNS OF BRAIN ACTIVITY.”BILL MARTIN, BLACKTHORN

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EMERGING COMPANY PROFILE

MICROBIOTAL REVERSE-ENGINEERINGBY MARK ZIPKIN, STAFF WRITER

Finch Therapeutics Inc. is developing an oral alternative to fecal microbial transplant that it believes entails less biology risk than more advanced oral candidates, with more targeted delivery than full microbiome transplants delivered via enema.Lead candidate FIN-403 is slated to enter Phase II testing this year to treat recurrent Clostridium difficile infection. According to co-founder and CEO Mark Smith, the therapy delivers nearly all of the microbial communities present in donor microbiomes that have successfully prevented recurrence of infection in the clinic.The company identifies successful donors via a strategic relationship with OpenBiome, a non-profit stool sample biobank and fecal microbiota transplant (FMT) provider that Smith founded in 2012. Finch sponsors the non-profit’s clinical trials in exchange for access to the data. “We take a top-down approach, starting with something that works,” Smith told BioCentury. “Other approaches are more bottom-up, where they say we think we understand the biology, and we’re going after this mechanism.”FIN-403 also uses a dual-release oral delivery technology licensed from Intract Pharma Ltd. that is triggered by both pH and colonic enzymes for targeted release in the colon. The idea is to deliver an entire community of microbes with proven efficacy directly to the site of infection.In a Phase I dose-finding trial of FIN-403 in 30 C. difficile patients, Smith said 89% of patients did not experience a recurrence, similar to the historical 85-90% cure rate of fecal transplants.The full-community content of FIN-403 differentiates it from a more advanced oral candidate in development by Seres Therapeutics Inc. SER-109 contains a cocktail of about 50 species of Firmicute eubacterial selected from healthy donor microbiomes.In a failed Phase II trial, 44% of patients receiving SER-109 had a recurrence, compared with 53% of those given placebo. A 15-patient Phase I study had shown no recurrences eight weeks after dosing.The product is now in a Phase III trial using a new assay to confirm C. difficile infection at entry,

and a dose 10 times higher than that used in the Phase II trial.FIN-403’s oral delivery differentiates it from a full-community microbiota product in development at Rebiotix Inc. RBX2660, which is delivered via enema, is set to enter Phase III testing for the indication this half.According to Smith, enema typically does not deliver therapeutic material to the cecum, the primary infection site, which could give FIN-403 an efficacy advantage. The blinded portion of a Phase IIb study showed 63.9% of patients given one or two doses of RBX2660 were free of recurrence at week 8, compared with 45.5% of patients given placebo (p=0.046). Data were presented at Infectious Disease Week in October 2016.Smith added that Finch’s targeted delivery is designed to achieve engraftment efficiency that is comparable to colonoscopic delivery — higher than that seen with enema — which may be important in indications beyond C. difficile

infection. He did not elaborate on the reasons or the indications.Rebiotix has also begun a Phase I trial of RBX7455, a lyophilized, orally delivered version of RBX2660 for recurrent C. difficile infections. It has not disclosed details about its delivery technology. CEO Lee Jones did say Rebiotix had adapted its lyophilized process to ensure a full microbial community was delivered.Finch also is developing a next-generation of products that will include combinations of select microbes tailored for specific indications. The microbes will be selected by applying computational tools developed at the Massachusetts Institute of Technology to clinical data obtained through OpenBiome.Several companies are in preclinical to Phase II testing with products containing one or more bacterial strains intended to restore or modulate microbiome function. But in contrast to other approaches that start by identifying abnormal microbiome functions in patients and then selecting combinations of bugs to correct or replace those functions, Smith noted Finch’s platform requires no hypotheses about gut microbial functions, which are poorly understood. This program’s lead candidate is FIN-524, a mixture of undisclosed bacterial strains in preclinical development for inflammatory bowel disease (IBD). In April, Takeda Pharmaceutical Co. Ltd. paid $10 million up front for exclusive worldwide rights to commercialize FIN-524 and follow-on products for IBD. Finch raised $5.6 million in a series A round in 2016, and is looking to close a larger series B round “at the end of the summer,” Smith said.

COMPANIES AND INSTITUTIONS MENTIONED

Finch Therapeutics Inc., Somerville, Mass.

Massachusetts Institute of Technology (MIT), Cambridge, Mass.

OpenBiome, Somerville, Mass.

Rebiotix Inc., Roseville, Minn.

Seres Therapeutics Inc. (NASDAQ:MCRB), Cambridge, Mass.

Takeda Pharmaceutical Co. Ltd. (Tokyo:4502), Osaka, Japan

REFERENCES

Cukier-Meisner, E. “Community organizers.” BioCentury (2016)

FINCH THERAPEUTICS INC.Somerville, Mass.

Technology: Computational platform that identifies therapeutically relevant bacterial strains from successful fecal microbiotal transplants

Disease focus: Infectious, autoimmune

Clinical status: Phase I

Founded: 2015 by Mark Smith, Eric Alm, Zain Kassam, James Burgess and Andrew Noh

University collaborators: Broad Institute of MIT and Harvard, Brigham and Women’s Hospital, Harvard Medical School, Massachusetts Institute of Technology

Corporate partners: Takeda Pharmaceutical Co. Ltd., Intract Pharma Ltd., OpenBiome

Number of employees: 65

Funds raised: $5.6 million

Investors: Draper Richards Kaplan Foundation, Anna Maria and Stephen Kellen Foundation, Jeff Smisek, Neil Rasmussen

CEO: Mark Smith

Patents: 1 issued covering targeted delivery technology

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GANGING UP IN RARE DISEASEBY EMILY CUKIER-MEISNER, SENIOR WRITER

A joint proposal from EMA and FDA that encourages companies to join multidrug platform trials for pediatric Gaucher’s disease came too late to serve its original purpose. But the proposal could provide a template for other rare diseases where multiple therapies compete for few patients, if stakeholders can overcome logistical and operational hurdles.EMA published its final version of the proposal July 3, and FDA plans to publish a draft version of the proposal for public comment “in the next few months,” according to an agency statement.The proposal was developed over six years with input from Japanese and Canadian regulators, patient advocacy groups, industry and healthcare providers who treat Gaucher’s. EMA and FDA began the project in 2011 after realizing that the pediatric investigation plans agreed upon for three Gaucher’s treatments newly approved or in Phase III testing at the time could require enrolling over half of the children with Gaucher’s in Europe. The regulators were concerned that competition for patients could mean slow enrollment or uncompleted studies, which could slow pediatric approvals.“There were several compounds being developed at the same time, and concern as well to not have the drugs available in a timely manner for the pediatric patients,” said Cécile Ollivier, a scientific officer in EMA’s Science and Innovation Support Office who led the project there. One of the regulators’ suggestions was a platform trial that tested multiple therapies from different companies simultaneously against a common control group. EMA presented the study as a way to reduce competition,

improve recruitment, reduce placebo exposure and standardize data collection.“The resources you need to identify patients is huge. Anything that can support the companies to do that, I would think is obviously a huge added bonus in terms of time and money,” said Tanya Collin-Histed, CEO of the European Gaucher Alliance (EGA).The proposed trial design calls for a double-blind randomized trial testing multiple arms of therapy against an active control of a single enzyme replacement therapy, or as an add-on to enzyme therapy. It would enroll treatment-naïve pediatric patients with Type I or Type III disease. It recommends evaluating the primary endpoint after two years of treatment, and follow-up monitoring for at least three years, preferably five.EMA proposed a non-inferiority study to address industry concerns that the trial might invite comparison among the investigational therapies.“If a product is working, this is what we want to know,” Ollivier said, “not if a product is working better than another product.”Based on input from patient advocates, the proposal would allow sponsors to choose among several possible primary endpoints and encourages including exploratory bone and lung biomarkers. The document suggests using modeling and simulation to optimize study designs and inform dosing.It also recommends that all existing and future patient registries collect common sets of pediatric data, including information on growth rate,

THINKSTOCK

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bone disease, treatment-related outcomes and adverse events, and disease-modifying and epigenetic factors.

NO TAKERS

Ollivier said so far no companies have asked EMA about participating in a Gaucher’s platform trial — possibly because the development landscape has changed. Only two of the three products that inspired the project made it to market, which reduced competition for patients in the required pediatric trials. EMA approved Shire plc’s Vpriv velaglucerase alfa in 2010 and granted the enzyme replacement therapy Orphan marketing exclusivity. The compound successfully completed its pediatric studies in 2016.In 2012 EMA rejected a marketing authorization for Protalix BioTherapeutics Inc.’s Elelyso taliglucerase alfa because the agency deemed it too similar to Vpriv.

Sanofi declined to say whether it has started a required pediatric trial of Cerdelga eliglustat tartrate, a ceramide analog that inhibits glucosylceramide synthase approved in the EU in 2014.According to BioCentury’s BCIQ database, there are three candidates in the clinic to treat Gaucher’s disease. The most advanced are in Phase II testing: Protalix’s PRX-112 and Sanofi’s GZ/SAR402671. Orphazyme ApS’s arimoclomol is in Phase I testing.PRX-112 is an oral encapsulated plant cell-expressed recombinant form of human glucocerebrosidase (GBA; GCase); GS/SAR402671 is a glucosylceramide synthase (GCS) inhibitor; arimoclomol is a small molecule inducer of heat shock protein 70 (Hsp70). After recognizing that some of the pressure on pediatric recruitment had eased, Ollivier said that in 2016 EMA and FDA decided to revise the proposal to create a template for other rare diseases. She said key changes included adding general guidelines on choosing endpoints and simplifying the structure of the proposed trial “to allow more room for interpretation.”Ollivier said rare diseases with multiple therapies in the pipeline that could see more competition for patients could include Fabry’s disease, Niemann-Pick disease type C (NPC) and Duchenne muscular dystrophy (DMD). Mucopolysaccharidosis IIIB (MPS IIIB, Sanfilippo type B syndrome) and Pompe’s disease also have multiple compounds in the clinic.

MIXED RECEPTION

None of the three companies with clinical Gaucher’s candidates provided an interview for this story, but four companies developing candidates for other rare diseases did. Their consensus view was that the most helpful aspects of the proposal were that it made acceptable endpoints clear, and showed that a single pediatric development plan could satisfy both EMA and FDA.Amicus Therapeutics Inc. Chairman and CEO John Crowley said if Amicus had had that level of regulatory clarity, it might have developed a more potent successor to Plicera afegostat after that molecule yielded Phase I/II data that were “not clear.”He said at the time, it wasn’t clear which patient populations or comparator treatments regulators wanted to see; regulators’ preferences for length of studies, preferred endpoints and comparators were also uncertain. “With the different study pathways, endpoints, and competing for patients with other players in the field — when all that lined up, even when we developed a much more potent, targeted chaperone, we didn’t put it into the clinic,” he said.Plicera was a small molecule chaperone that bound to glucocerebrosidase to treat Gaucher’s.He thought platform trials could be broadly applicable across rare diseases, but would not suggest a candidate program from Amicus’ pipeline.Two other companies said they would be interested in joining a standing platform trial for pediatric rare diseases, but didn’t see a clear pathway to setting one up.Lixte Biotechnology Holdings Inc. CEO John Kovach would like to study LB-205 in a platform trial because it’s unlikely the company could take on development in Gaucher’s itself. LB-205 is an HDAC inhibitor in preclinical testing for multiple indications including Gaucher’s disease.Kovach said because Lixte is small and not focused on rare diseases, a standing platform trial could be a way to pitch investors a side project in Gaucher’s.“If we can say in a year we could have a compound approvable, our investors may be interested — with a modest investment we could do that,” he said.EGA’s Collin-Histed supported the idea overall, but is worried about what happens if there aren’t enough therapies at a similar stage of development to fill out the trial arms.“Would you then have to delay a clinical trial arm going ahead for other therapies to be at that point?” she asked.However, platform trials in other indications, such as the I-SPY breast cancer studies, have been designed to run continuously, adding and dropping arms as new drug candidates become eligible and old candidates either succeed or fail.VP of Regulatory Affairs and Quality Assurance Sean O’Bryan said Lysogene S.A. wouldn’t want to enter either of its products in a platform trial for fear of jeopardizing their Orphan status. O’Bryan noted platform trials would generate readily comparable data for multiple products in a similar time frame.

“IF A PRODUCT IS WORKING, THIS IS WHAT WE WANT TO KNOW, NOT IF A PRODUCT IS WORKING BETTER THAN ANOTHER PRODUCT.”CÉCILE OLLIVIER, EMA

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“You hope to get to the finish line first with a meaningfully efficacious product to get exclusivity,” he said.Lysogene’s LYS-SAF-302 is a surgically administered adeno-associated virus serotype 10 (AAV10) vector carrying human N-sulfoglucosamine sulfohydrolase (SGSH; HNS) that has completed a Phase I/II study to treat MPS IIIA; LYS-GM101 is an AAV10 vector carrying the human gene for galactosidase beta 1 (GLB1) in preclinical testing to treat GM1 gangliosidosis.Ollivier told BioCentury that companies are welcome to discuss those concerns with EMA, and said the agency could consider other versions of the protocol, including studies that start and stop treatment arms on their own timelines.It’s also unclear who would create the trials’ infrastructure and protocols. Shire VP and Head of Rare Diseases and Internal Medicine Hartmann Wellhoefer said to avoid antitrust violations, companies would have to rely on a neutral third party to organize the trials. This is how platform trials in other disease areas have been created. The I-SPY breast cancer studies were designed and are managed by the Biomarkers Consortium, a public-private partnership of the non-profit Foundation for the National Institutes of Health whose members include FDA, NIH and pharmaceutical and diagnostics companies. Crowley said only a few rare diseases — such as DMD, muscular dystrophy or amyotrophic lateral sclerosis (ALS) — have clinical research center networks in the U.S. that could support such trials. He suggested that patient groups could encourage forming networks for other rare diseases, or NIH could create a framework for doing so.Collin-Histed agreed that patient groups could be instigators, but said few currently have the resources or experience to do so.Ollivier added that in the EU, study support could come from European Reference Networks — virtual networks of healthcare providers that focus on care for rare or highly specialized diseases — and the European Network of Paediatric Research at EMA (Enpr-EMA).

COMPANIES AND INSTITUTIONS MENTIONED

Amicus Therapeutics Inc. (NASDAQ:FOLD), Cranbury, N.J.

Biomarkers Consortium, Bethesda, Md.

European Gaucher Alliance, Gloucestershire, U.K.

European Medicines Agency (EMA), London, U.K.

Foundation for the National Institutes of Health, Bethesda, Md.

Lixte Biotechnology Holdings Inc. (OTCQB:LIXT), East Setauket, N.Y.

Lysogene S.A. (Euronext:LYS), Neuilly-sur-Seine, France

National Institutes of Health (NIH), Bethesda, Md.

Orphazyme ApS, Copenhagen, Denmark

Protalix BioTherapeutics Inc. (NYSE-M:PLX; Tel Aviv:PLX), Carmiel, Israel

Sanofi (Euronext:SAN; NYSE:SNY), Paris, France

Shire plc (LSE:SHP; NASDAQ:SHPG), Dublin, Ireland

U.S. Food and Drug Administration (FDA), Silver Spring, Md.

REFERENCES

European Medicines Agency. “Paediatric Gaucher disease: a strategic collaborative approach from EMA and FDA.” (2017)

Request a free trial, just send us an email at:bcinnovations@biocentury.com

COVER STORYFDA’S REGENERATIONAs FDA prepares to publish a comprehensive regenerative medicine framework this September, stakeholders start to lay out their wish lists.

PRODUCT R&D SPHERES OF INFLUENCEGenentech and AstraZeneca team up to test whether liver organoids can beat the gold standard preclinical predictor of liver tox.

EMERGING COMPANY PROFILE BREACHING THE GATESJunction is creating openings in the BBB to help therapeutics enter the brain and neurotoxic molecules diffuse out.

TRANSLATION IN BRIEF SEPSIS’ SWEET TOOTHCross-talk between iron and glucose metabolism promotes survival during sepsis and can be manipulated by transferrin injections.

CYCLING ACROSS THE MEMBRANEA method of delivering nanobodies into cells opens doors to novel targeting and manipulation of intracellular antigens.

BETTER GLIOMA MOUSE MODELSMSKCC researchers use CRISPR-Cas9 editing to generate a new glioma model and identify a gene-fusion oncogenic driver.

DISTILLERY

This week in therapeutics This week in therapeutics includes important research findings on targets and compounds, grouped first by disease class and then alphabetically by indication.

This week in techniques This week in techniques includes findings about research tools, disease models and manufacturing processes that have the potential to enable or improve all stages of drug discovery and development.

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GOING WITH THE FLOWBY VIRGINIA LI, STAFF WRITER

As early stage VC rounds continue to grow, Canaan Partners is once again planning to bump up its allocation to biopharma with its new $800 million fund. Nearly a third of Canaan XI, which closed on July 25, will go to the sector. About 60% will go to IT, and the remainder to digital health and medtech. Canaan will continue to invest primarily in seed and series A rounds, as well as occasional later stage rounds for existing portfolio companies. Canaan’s Nina Kjellson said the firm began to increase its allocation to biopharma with its tenth fund.When Canaan X closed at $675 million in 2014, the firm had planned to allocate a third of the fund to healthcare, and split healthcare investments between biopharma, medtech and healthcare IT/digital health (see BioCentury, Oct. 20, 2014). In the end, Canaan X invested 40% in healthcare generally, and 29% in biopharma. Canaan IX had invested 19% in biopharma. Kjellson said the bump to biopharma reflected increasing deal flow and the growing size of early venture rounds. “In sectors such as biopharma, the series A round size has been creeping up, and so our average deal size has crept up a bit,” she said.The ninth fund invested in A rounds for four biopharma companies that averaged $25.8 million. The tenth invested in seven biopharma series A rounds that averaged $36.6 million.With the latest fund, Kjellson said Canaan plans to contribute about $15 million per round, compared with the $7-$10 million it has invested historically. She expects Canaan XI to invest in 15-17 biopharma companies, and said the firm will continue to balance risk with a mix of novel platform companies and reformulation plays. Recent investments in platform plays include RNA company Arrakis Therapeutics Inc., which raised a $38 million series A in February, and synthetic lethality company Ideaya Biosciences Inc., which closed a $46 million series A last year (see BioCentury, March 2). Also in February, Canaan led a $32 million series A for reformulation company Dauntless Pharmaceuticals Inc. (see BioCentury, Feb. 24).

“THE SERIES A ROUND SIZE HAS BEEN CREEPING UP, AND SO OUR AVERAGE DEAL SIZE HAS CREPT UP A BIT.”NINA KJELLSON, CANAAN

“SEEING THE SAFETY PROFILE IS A CRITICAL DE-RISKING STEP.”CARLO RIZZUTO, VERSANT

SAFETY FIRSTBY VIRGINIA LI, STAFF WRITER

Phase I safety data for VNRX-5133 enabled VenatoRx Pharmaceuticals Inc. to bring its first institutional investors on board for a $42 million series B round. Versant Ventures led the tranched round on July 25, joined by Abingworth and Foresite Capital. Details of the tranches are undisclosed.The lead program is an IV broad-spectrum beta lactamase (LACTB) inhibitor. Bacteria produce beta lactamase to inactivate and confer resistance to beta-lactam antibiotics.“Seeing the safety profile is a critical de-risking step,” said Versant’s Carlo Rizzuto. “In the anti-infectives space, efficacy translates because the preclinical models are quite good, but you never know on the safety profile.”

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Because of the program’s risk profile, President and CEO Christopher Burns said VenatoRx opted for public funds in the beginning. “We thought it would be difficult to attract institutional investment,” he told BioCentury.He said VenatoRx has been awarded more than $100 million in government grants and contracts since its 2010 launch, primarily from NIH’s National Institute of Allergy and Infectious Diseases (NIAID). In 2013, the company also raised $3.5 million in a series A round from undisclosed angel investors and received an $8.9 million grant from the Wellcome Trust Foundation.The funds allowed the biotech to generate unpublished data showing VNRX-5133 inhibits all four classes of beta lactamase in vitro and in vivo. No marketed beta lactamase inhibitors target all four classes of the enzyme.Furthermore, he said VNRX-5133 demonstrated a good safety profile in Phase I testing. The data are not disclosed.VNRX-5133 is in Phase I testing in combination with an undisclosed beta-lactam antibiotic. Burns said the company will initially develop VNRX-5133 for complicated urinary tract infections (cUTIs) and complicated intra-abdominal infections (cIAIs). The program is slated to enter registrational trials in 1H18, with NDAs planned for 2020. Burns said the combination of government funding and the series B will bring VNRX-5133 “deep into registrational studies” and enable VenatoRx to complete Phase I studies of VNRX-7145, an oral beta lactamase inhibitor in preclinical testing.

MONEY RAISED IN 2017Last week, the biotech industry raised $883.9 million, bringing to $35.4 billion the total raised year-to-date. In 2016, a total of $84.9 billion was raised, including $49.1 billion in debt, $10.3 billion in follow-ons, $3.8 billion in PIPEs and other equity, $7.2 billion in IPOs, and $14.6 billion in venture capital. Totals include overallotments and warrants, and are rounded to the nearest millions.

IPO$2,733

Venture$10,211

Debt$12,177

Follow-on$7,192

PIPEs & other equity

$3,070

Total YTD: $35,383 ($M)

$24.

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$2.7

$2.2

$7.9

$4.5

$10.

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$3.1

$7.2

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2016 vs 2017

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POTENTIATOR POTENTIALBY VIRGINIA LI, STAFF WRITER

Preclinical data showing how eFT508 could fit into checkpoint inhibitor cocktails helped Effector Therapeutics Inc. snag Pfizer Inc. (NYSE:PFE) as both a development partner and an investor. On July 24, Effector closed a $19.3 million first tranche of a $38.6 million series C round led by new investor Pfizer Venture Investments. The second and final tranche is slated to close in 2018. The trigger is undisclosed.New investor Alexandria Venture Investments and existing investors U.S. Venture Partners, Abingworth, Novartis Venture Fund, SR One, The Column Group, Altitude Life Science Ventures, Sectoral Asset Management, AbbVie Biotech Ventures, BioMed Ventures and Astellas Venture Management participated. Effector is developing molecules that block protein translation upstream of multiple oncogenic drivers. eFT508 is a small molecule inhibitor of MAP kinase interacting serine-threonine kinase 1 (MKNK1; MNK1) and MKNK2 (MNK2). It is in Phase I/II testing as monotherapy for lymphoma and solid tumors. Pfizer Venture Investment’s Elaine Jones said Pfizer was attracted by Effector’s “preclinical data package showing effects with eFT508 both as a single agent and as a potentiator for checkpoint inhibitors.”

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In April, Effector reported in vitro data at the American Association for Cancer Research (AACR) meeting showing eFT508 down-regulated immune checkpoint receptors PD-1 and lymphocyte-activation gene 3 (LAG3; CD223). The data also showed increased antigen presentation on tumor cells, macrophages and dendritic cells. eFT508 plus PD-1 or PD-L1 inhibitors significantly increased response rates compared to checkpoint inhibitors alone in a syngeneic mouse model of colorectal cancer (CRC).President and CEO Steve Worland said after the data were reported, Effector began discussing potential combinations with Pfizer’s oncology team. In June Effector partnered with Pfizer and Merck KGaA (Xetra:MRK) to conduct a Phase II trial evaluating eFT508 with or

without Bavencio avelumab in patients with microsatellite stable relapsed or refractory CRC. Merck and Pfizer share rights to the PD-L1 inhibitor.The trial is slated to start in 3Q17; Effector, Merck and Pfizer will share clinical costs. “It was a natural outgrowth of those discussions to bring Pfizer in to lead the series C,” said Worland.Effector plans to begin clinical testing of eFT508 with a second undisclosed checkpoint inhibitor to treat solid tumors. The timeline is undisclosed.Next year, Effector plans to report data from both Phase I/II eFT508 monotherapy trials and both eFT508 combination trials. It also will begin clinical testing of eFT226, an inhibitor of eukaryotic translation initiation factor 4A1 (EIF4A1), and identify a lead eIF4E inhibitor.

EARNINGS ON DECKAt least 14 biotechs and pharmas are slated to report earnings this week. (A) Fiscal 1Q; (B) Premarket on U.S. exchange; postmarket in Israel; (C) During trading hours in Europe; premarket on U.S. exchanges

Company Date Pre/post mkt 2Q17 EPS est 2Q16 EPS Expected chg

Sanofi (Euronext:SAN; NYSE:SNY) 7/31 Pre €1.30 €1.31 -1%

Daiichi Sankyo Co. Ltd. (Tokyo:4568) (A) 7/31 During NA ¥44.69 NA

Mitsubishi Tanabe Pharma Corp. (Tokyo:4508) (A) 7/31 NA NA ¥39.04 NA

Incyte Corp. (NASDAQ:INCY) 8/1 Pre -$0.03 $0.18 NA

Pfizer Inc. (NYSE:PFE) 8/1 During $0.66 $0.64 3%

Illumina Inc. (NASDAQ:ILMN) 8/1 Post $0.69 $0.86 -20%

Bioverativ Inc. (NASDAQ:BIVV) 8/2 Post $0.71 NA NA

Eisai Co. Ltd. (Tokyo:4523) (A) 8/2 NA NA ¥68.92 NA

Allergan plc (NYSE:AGN) 8/3 Pre $3.92 $3.35 17%

Merck KGaA (Xetra:MRK) 8/3 Pre €1.54 €1.55 -1%

Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) 8/3 Pre $3.16 $2.82 12%

Teva Pharmaceutical Industries Ltd. (NYSE:TEVA; Tel Aviv:TEVA) 8/3 Pre (B) $1.07 $1.25 -14%

Emergent BioSolutions Inc. (NYSE:EBS) 8/3 Post $0.26 -$0.18 NA

Shire plc (LSE:SHP; NASDAQ:SHPG) 8/3 During (C) $3.52 $3.38 4%

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PRICE GAINSStocks with greatest % price increase in the week ended 7/28.(Priced above $2; 5,000 minimum share volume)

Company Ticker $Close $Chg % Chg Vol(00)BGI Genomics 300676 RMB50.940 RMB19.310 61% 2416Novan NOVN 5.310 1.260 31% 8805Sienna Biopharmaceuticals1 SNNA 19.540 4.540 30% 27462Moleculin Biotech MBRX 2.410 0.500 26% 168246ImmunoGen IMGN 6.960 1.300 23% 225914Genocea GNCA 6.160 1.110 22% 169428Kitov Pharmaceuticals2 KTOV 2.280 0.380 20% 646043Syros SYRS 23.060 3.740 19% 11139Gemphire GEMP 20.610 3.160 18% 8173Syngen Biotech 8279 NT$120.00 NT$17.50 17% 19920NeuroDerm NDRM 38.850 5.650 17% 153035Indivior INDV 369.5p 53.1p 17% 110657

PRICE DECLINESStocks with greatest % price decline (criteria as above).

Company Ticker $Close $Chg % Chg Vol(00)Eagle Pharmaceuticals EGRX 50.480 -24.720 -33% 44492Dare BioScience DARE 3.700 -1.560 -30% 6796Quantum Genomics ALQGC €3.420 -€1.180 -26% 12624Novus Therapeutics NVUS 4.110 -1.370 -25% 1047Aeterna Zentaris3 AEZS 2.180 -0.690 -24% 183309Tetraphase TTPH 6.480 -1.610 -20% 300374Kamada4 KMDA 4.500 -1.050 -19% 19985TapImmune TPIV 3.010 -0.590 -16% 9263OncoCyte OCX 3.600 -0.700 -16% 1272Pacira PCRX 40.000 -7.650 -16% 105010Minerva Neurosciences NERV 6.600 -1.250 -16% 12921Natera NTRA 8.180 -1.510 -16% 8963

VOLUME GAINSGreatest changes in volume above 5,000 shares.

Company Ticker Vol(00) %Chg $Close $ChgFlex Pharma FLKS 52553 4140% 4.100 0.500Midatech Pharma5 MTP 2923 4013% 2.700 0.063Faron Pharmaceuticals FARN 389 3789% 702.5p -12.5pObsEva OBSV 20108 3110% 7.970 -0.340Genocea GNCA 169428 2399% 6.160 1.110Reata RETA 51837 1739% 30.690 -0.410NeuroDerm NDRM 153035 1708% 38.850 5.650Tetraphase TTPH 300374 1056% 6.480 -1.610Bioventix BVXP 226 862% 1925p 75p4D Pharma DDDD 162 734% 246p -6.5p

1 IPO during the week. Price change from IPO price.2 Includes volume from Tel Aviv Stock Exchange and converted ADSs (1ADS = 20 shares)3 Includes volume from Toronto Stock Exchange4 Includes volume from Tel Aviv Stock Exchange5 Includes volume from London Stock Exchange

BIOCENTURY 100 ADVANCE-DECLINE TRENDS

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vol. (00)Jun 30 5935.85 26 3924944 73 4635807Jul 07 5988.17 68 2754476 31 1963028Jul 14 6031.77 57 4010502 43 2340787Jul 21 6193.24 66 5816764 34 1573400Jul 28 6162.55 36 2642705 64 5096209

BIOCENTURY 100 PRICE & VOLUME TRENDCumulative weekly performance of 100 bioscience stocks. 12-week period. Line shows Price Level change (Left scale. Index base=1000 on May 10, 1996). Bars show cumulative volume in millions (right scale).

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BioCentury tracks 852 issues that report prices and volume daily. The BioCentury 100 is a subset used to monitor price and volume trends

BIOCENTURY LONDON INDEXWeekly change in the combined market capitalization for 14 bioscience stocks listed on the LSE or AIM, 12-week period. Index base =1000 on May 10, 1996.

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BIOCENTURY 100 INDICATORSWeek ended 7/28/17

PRICES 6162.55dn 0.5%

VOLUME 773.9M shrsup 5%

17 WEEK OF JULY 31, 2017

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