Synlogic, which is developing modified bacteria to use as medicine, has gone public in an unconventional way.
Instead of hiring Wall Street bankers to shop its shares to new investors, as most companies do for an initial public offering, Cambridge, MA-based Synlogic has merged with the shell of a former biotech company.
The so-called reverse merger is not a common route to the public markets. It’s often pursued by companies that are not drumming up enough interest in a conventional IPO under the terms they want. Synlogic CEO J.C. Gutierrez-Ramos (pictured), who will remain in charge after the merger, calls the deal an “opportunistic and efficient way” to raise $82 million “without having to go through all the steps and potential distractions of a traditional IPO process.”
Eleven biopharma companies have gone public this year, including AnaptysBio (NASDAQ: [[ticker:ANAB]]) of San Diego and Vancouver-based Zymeworks (NYSE: [[ticker:ZYME]]).
Synlogic is taking over the public listing from Mirna Therapeutics, a failed developer of cancer drugs in Austin, TX, that did not progress past Phase 1 trials. Synlogic shareholders will own 83 percent of the new company.
About $40 million of the new cash comes from Mirna, and Synlogic is also raising $42 million in a Series C round of financing. The firm raised $70 million in its first two funding rounds, most recently in early 2016.
Shareholders still need to approve the merger.
Synlogic is based on the work of MIT professor and synthetic biology pioneer Jim Collins and his protégé Timothy Lu. Collins initially thought to reprogram living microbes to act as diagnostics or treatments for infectious diseases like cholera. But as he told Xconomy in 2015, Synlogic’s venture backers steered the company toward rare genetic metabolic disorders, where the microbes could be used, for instance, to break down a toxic protein that is harming the patient. Microbes, like any other single cell, make proteins. Synlogic wants to harness that power and effectively turn the microbes into microscopic and controllable drug-making factories.
Synlogic plans to equip its modified bugs with various fail-safes to make sure they stop when their job is done. Then they’re packed into a pill that the patient swallows. But first Synlogic has to convince regulators that it’s safe for people to ingest genetically engineered bacteria. “Clearly [these drugs] will have a different type of regulatory scrutiny—and they should,” Gutierrez-Ramos told Xconomy last year.
Synlogic’s first product candidate aims to treat hyperammonemia, or elevated ammonia levels in a patient’s blood stream. The first human test of the modified bacteria will be a safety study in healthy volunteers. It should start in mid-2017, says Gutierrez-Ramos. Although he acknowledges that “there is no regulatory precedent,” he is encouraged that the FDA group handling the evaluation is the same that oversees vaccines, another type of live biotherapeutic.
Going after rare diseases will require smaller trials that take less cash to complete than studies in more common diseases. The cash on hand after the merger should be enough to get Synlogic to a clinical “proof of concept”—that is, to a decision whether early safety and efficacy data from human studies merit pushing ahead in hyperammonemia and another rare disorder, phenylketonuria.
Ben Fidler contributed to this report.
