A bull market doesn’t guarantee a successful IPO. Syndax Pharmaceuticals of Waltham, MA, for instance, began preparing for an IPO back nearly a year ago, but it never made its Nasdaq debut.
Instead, after 10 months as an IPO candidate, it cut a $100 million licensing deal with the Japanese drug firm Kyowa Hakko Kirin and withdrew the offering.
On its face, it looks like Syndax couldn’t win investor support and moved on to Plan B. But CEO Arlene Morris (pictured above) tells a different story.
According to Morris, Syndax generated data during its IPO preparations that steered the company away from the public markets. A preclinical study indicated that its cancer drug entinostat might help boost the effects of certain “checkpoint inhibitors”—a new wave of cancer immunotherapy drugs that help the immune system better identify tumors.
Data affirming this checkpoint connection was news to Syndax. With cancer immunotherapy companies enjoying huge clinical and financial success these days, Morris says the data were a chance to re-assess Syndax’s strategy. “We thought we ought to step back from the financing process and figure out where that takes us,” she says.
It’s apparently taking Syndax towards a few deals. Morris says in the near future, Syndax will announce a deal with an unspecified large pharmaceutical company to run a clinical trial with entinostat in combination with a cancer immunotherapy drug. A second deal will test entinostat in tandem with another drug in animals, she says.
These types of deals have become common recently, with drug companies designing combination trials with other companies’ drugs, mixing and matching checkpoint inhibitors with other therapies to boost their abilities.
Bristol-Myers Squibb (NYSE: [[ticker:BMY]]), for instance, is running several combination trials for its PD-1 blocker nivolumab (Opdivo) via deals with Novartis (NYSE: [[ticker:NVS]]), Celldex Therapeutics (NASDAQ: [[ticker:CLDX]]), and Seattle Genetics (NASDAQ: [[ticker:SGEN]]).
This immuno-oncology mix and match game is a new strategy for Syndax. Until now, the company has been developing entinostat—a drug designed to selectively hit histone deacetylases, or HDACs, that are most relevant to tumors—as an add-on to hormone therapy for breast cancer patients. Basically entinostat is supposed to make tumor cells more vulnerable to hormone therapy, which would help patients stay on such treatment longer and avoid shifting to chemotherapy and its more significant side effects.
Syndax is also testing entinostat in lung and ovarian cancers, but it’s furthest along in breast cancer. With the help of the National Cancer Institute, it started in June a Phase 3 trial of about 600 patients with hormone receptor positive breast cancer. Syndax has a breakthrough therapy designation—a ticket for a speedy review of the drug from the FDA. Data are expected in mid-2017.
But breast cancer is a tough, competitive field. Pfizer (NYSE: [[ticker:PFE]]) just won FDA approval for a drug called palbociclib (Ibrance) that, like entinostat, is given in tandem with a hormone therapy and meant to delay the need for chemotherapy. Novartis has a similar drug, buparlisib, in Phase 3 testing. It’ll be hard for Syndax to break in.
Yet Morris says Syndax didn’t change its strategy because of competition. Rather, she looks at the palbociclib approval as a positive for Syndax. Palbociclib had a breakthrough designation and was approved quickly, and Morris implies that Syndax could follow a similar path if the data are strong.
“We think there’s a need for multiple therapies to cycle through,” she says.
That was Syndax’s pitch to investors in its original IPO prospectus. But now there’s more to the story.
Last summer, the Proceedings of the National Academy of Sciences published a study in which entinostat, when combined with two types of checkpoint drugs—PD-1 and CTLA-4 blockers—wiped out breast and colorectal tumors and metastases in 80 percent of mice. Without etinostat, those checkpoint inhibitors alone weren’t effective in the same mouse populations.
Morris says etinostat appears to have an effect on two types of cells—regulatory T cells and myeloid derived suppressor cells (MDSCs). These cells suppress the immune system’s response to cancer; entinostat seems to stymie that activity. She says the effect on MDSCs is particularly important because those cells have been associated with poor outcomes in immune-based cancer therapies.
“We think that effect on that particular cell type is unique,” she says.
When Syndax was on its IPO roadshow—a blitz of wall-to-wall meetings with potential investors—in June, it had to be careful talking about the new data, says Morris, because they weren’t included in its public prospectus at the time. (Any material information about a company has to be included in an S-1; Syndax later amended its filing to include the immuno-oncology data and plans to develop entinostat as “an immunomodulatory agent.”)
Perhaps the data would have helped. Syndax was having a tough time with its offering, breaking through the noise of roughly 25 other companies also vying to go public.
“There were just a lot of people out there and the market was not as robust as it was a year before,” she says.
So Syndax pulled back and looked for a different way to raise cash without diluting its shareholders.
Announced on Jan. 7, the Kyowa Hakko Kirin deal came together just before Christmas. Syndax received $25 million up front, and potentially $100 million overall, by selling Kyowa Hakko Kirin rights to entinostat in Japan and Korea. (Syndax officially withdrew its IPO on Jan. 22.)
The deal has given Syndax breathing room. It aims to start its combination immuno-oncology studies this summer, and it now has enough cash to get closer to its Phase 3 data in breast cancer. But with more studies coming, and more big checks to write to fund them, a second shot at an IPO seems inevitable.
“At some point the public markets always make sense for a company in late stage development, but I think our balance sheet gives us a little bit of flexibility about how we do it,” Morris says.
