Yumanity is combining operations with Proteostasis Therapeutics, a deal that gives the biotech a public listing for its neurodegenerative disorder compounds including a Parkinson’s disease drug candidate in early-stage clinical development.
According to terms of the merger agreement announced Monday, Proteostasis (NASDAQ: PTI) will acquire all outstanding shares of Yumanity in exchange for new shares of PTI common stock. When the deal closes, Yumanity shareholders will own about 67.5 percent of the combined company while Proteostasis shareholders will own the remaining 32.5 percent. The combined company will be based at Yumanity’s Boston headquarters and will be led by Richard Peters, president and CEO of Yumanity. The company expects to trade on the Nasdaq under the stock symbol “YMTX.”
The merger agreement means that Proteostasis must find a new home for its cystic fibrosis (CF) drug candidates. Speaking on a conference call, president and CEO Meenu Chhabra said her Boston-based company has laid off all of its employees, except five who are either working to close the merger or to negotiate deals for the CF drugs. According to the company’s annual report, Proteostasis’s headcount as of March 5 was 44 full-time employees.
Shares of Proteostasis opened Monday at $1.58 apiece, up 14 percent from Friday’s closing price. When Proteostasis went public in 2016, it priced its shares at $8 each.
Both Yumanity and Proteostasis are developing drugs that address the misfolded proteins at the root of disease. Yumanity co-founder Susan Lindquist, who died in 2016, and Proteostasis co-founder Jeff Kelley worked together at FoldRx, a Cambridge, MA-based company that was developing drugs for diseases characterized by protein misfolding. Pfizer (NYSE: PFE) acquired FoldRx in 2010. Under the pharmaceutical giant, lead FoldRx compound tafamidis was approved last year as a treatment for a rare form of cardiomyopathy.
Yumanity’s technology, which is based on research from MIT’s Whitehead Institute, uses yeast cells to model protein misfolding for neurodegenerative diseases. Those models are screened against chemical libraries to find ones that show the potential to protect cells from the toxic effects of misfolded proteins. Peters, who joined Chhabra on the conference call, said his company’s technology platform has yielded more than 15 targets for neurodegenerative diseases.
The most advanced Yumanity program, YTX-7739, addresses alpha-synuclein, a protein associated with the destruction of nerve cells. It’s already the target of Parkinson’s disease drug candidates in development by other companies. But rather than trying to block the protein, Yumanity instead aims for SCD, an enzyme that Peters says can more easily be hit by a drug while also reducing the toxic effects of alpha-synuclein. A Phase 1b test of the Yumanity drug is expected to report results in the second quarter of 2021.
A second program, YTX-9184 is expected to start Phase 1 testing in the third quarter of next year as a treatment for dementia with Lewy bodies. Yumanity also has a research alliance with Merck (NYSE: MRK), a a deal struck in June to discover and develop drugs for amyotrophic lateral sclerosis and frontotemporal lobar dementia. Peters said that Yumanity’s aim is to advance one new program into clinical testing per year.
Prior to the merger announcement, Yumanity had raised more than $100 million to finance its research. After the merger with Proteostasis closes, Peters estimates the combined company will have enough cash to last until 2022.
Proteostasis has been developing drugs to treat cystic fibrosis in patients with particular genetic mutations. The company vied to compete against CF drugs sold by Vertex Pharmaceuticals (NASDAQ: VRTX), which has commercialized several drugs and drug combinations that address a range of genetic mutations that cause the disorder. But financial analysts have said that the company’s early-stage tests fell short of matching the clinical benefit of the Vertex drugs.
A study financed by the European Commission is currently underway testing tissue samples from CF patients who have genetic mutations that aren’t addressed by currently available CF drugs. Using an organoid—a lab version of the intestine fashioned from a patient tissue sample—the personalized medicine approach is intended to show that an ex vivo (outside of the body) test can predict a patient’s response to Proteostasis’s CF drugs. Patient’s whose organoids inidicate likely response to the drugs will be treated with them to see if the prediction was correct. Chhabra said enrollment is complete at 502 patients. Results from the ex vivo portion of the study are expected in fourth quarter of this year.
Chhabra said that her company’s CF compounds have the best chance of reaching patients if they are developed by a larger pharmaceutical company with the capability to develop and commercialize drugs globally. Proceeds from any deal involving the CF assets will be shared on a sliding scale with Proteostasis shareholders via contingent value rights. If a deal is completed before the merger closes, Proteostasis shareholders get up to 100 percent of the net proceeds. That percentage declines in subsequent months. If a deal for the CF assets does not happen within nine months of the merger’s close, all of the proceeds from any deal will go to the combined company.
The companies expect to complete the merger in the fourth quarter of this year. Their boards of directors have approved the deal, but Proteostasis shareholders still need to sign off. When the transaction is complete, the Yumanity board will be expanded from seven to nine to with the addition of two current Proteostasis directors.
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