Flex Pharma, a company formed four years ago by serial biotech executive Christoph Westphal to develop treatments for muscle cramps, will layoff more than half of its staff and look to sell itself after suffering another setback in clinical testing.
Boston-based Flex (NASDAQ: [[ticker:FLKS]]) said it will halt two Phase 2 trials of experimental FLX-787 because of “oral tolerability concerns” seen in some patients. Flex had been testing FLX-787 as a treatment for painful cramps associated with neurological diseases like multiple sclerosis (MS).
Because of the new findings, Flex would have had to test new drug formulations and doses to press forward, which is “challenging for the company based on our current resources,” said CEO and president William McVicar, in a statement. Flex had just $23.9 million in cash as of March 31, enough to get the company to mid-2019.
The company will ax 60 percent of its workforce by the end of June and pursue “strategic alternatives,” like a sale or merger. Flex shares plummeted 68 percent, to $1.31 apiece, in pre-market trading on Wednesday.
Westphal has helped start a number of companies, raise cash from private investors, and take them public—with mixed results. Here are a few examples. Alnylam Pharmaceuticals (NASDAQ: [[ticker:ALNY]]) is close to having a drug on the market, and Momenta Pharmaceuticals (NASDAQ: [[ticker:MNTA]]) already does—both are worth far more than when they went public. OvaScience (NASDAQ: [[ticker:OVAS]]), a developer of fertility products, and Verastem (NASDAQ: [[ticker:VSTM]]), a cancer drugmaker, have each suffered setbacks over the years and trade far less than their IPOs. OvaScience just announced a restructuring last month. Westphal also founded and ran Sirtris, the controversial anti-aging biotech firm that GlaxoSmithKline (NYSE: GSK) bought in 2008 for $720 million, and later shuttered in 2013.
Westphal started Flex in 2014, roughly a year and a half after relinquishing the CEO seat at Verastem. The startup raised $40 million in private financing from a diverse set of investors and parlayed that round into an IPO that sold shares at $16 apiece. Shares closed as high as $22.56 apiece in April of that year. Westphal remained the company’s biggest shareholder, according to an April 23 SEC filing, with a roughly 22 percent stake (his venture firm, Longwood Funds, held another 18 percent). He switched from CEO to chairman in June 2017 and resigned from Flex’s board in March.
Flex’s plan was to develop treatments for muscle cramps, starting with dietary supplements and consumer products and eventually therapeutics for cramps associated with diseases like MS. But the company has since suffered multiple clinical setbacks and strategic restarts. The company’s drink for cramps, “HOTSHOT,” generated just $179,000 in revenue during the first quarter, and Flex announced a strategic review of that business in March. In 2016, FLX-787 failed a test to prevent nocturnal leg cramps. The company continued with tests in MS, ALS, and Charcot-Marie-Tooth. But in light of today’s news, the company will operate with a reduced staff that will develop FLX-787 for patients with difficulty swallowing, and run the HOTSHOT business until the strategic review is finished.
