Zentalis Leads a Trio of Biotechs Charting a Course for Wall Street

Xconomy New York — 

Cell therapies and antibody drugs grab much of the attention and investment in cancer drug development but the scientists at Zentalis Pharmaceuticals contend that there’s a place for small molecules too. Now the biotech is preparing for an initial public stock offering to advance its pipeline, which includes a lead candidate in testing in combination with a Pfizer drug.

Zentalis set a preliminary $100 million target for its IPO, according to documents filed with the Securities and Exchange Commission late Friday. The New York-based company has applied for a Nasdaq listing under the stock symbol “ZNTL.” That company is joined by Ayala Pharmaceuticals and Lyra Therapeutics, both of which also filed IPO paperwork last Friday.

Zentalis is developing small molecules to address biological pathways of cancers. The company says in its prospectus its small molecules are different than currently marketed therapies, and that they also have the potential to address large populations of cancer patients.

The Zentalis pipeline consists of four compounds, three of which are in early-stage clinical testing. Lead drug candidate, ZN-c5, is designed to target estrogen receptors (ER), proteins to which the hormone estrogen binds. Tumors that are ER positive and human epidermal growth factor receptor (HER2) negative rely on these proteins for their growth and survival. Zentalis’s ZN-c5 is an oral drug that’s a selective estrogen receptor degrader (SERD). The compound is in Phase 1/2 testing.

The Zentalis drug is intended to challenge fulvestrant (Faslodex), an AstraZeneca (NYSE: AZN) SERD. In 2018, the last year prior to the launch of generic competition, fulvestrant accounted for more than $1 billion in revenue for AstraZeneca. This drug is administered via two 5 mL intramuscular injections given once a month. In addition to being painful, injections of the drug into the muscle restricts how much ER degradation can be achieved, limiting its efficacy, Zentalis says.

As a once-daily pill, Zentalis believes its drug would offer patients more convenience. The drug might also be more effective. According to early data from a Phase 1/2 study, the drug was rapidly absorbed and achieved high exposure levels in the body. The Zentalis drug was well tolerated by patients and no dose-limiting toxicities were reported. Additional preliminary data from the dose escalation portion of the study are expected in the second half of this year.

The Zentalis drug is also being tested in combination with palbociclib (Ibrance), a Pfizer (NYSE: PFE) cancer drug that is FDA approved as a treatment for HR positive, HER2 negative breast cancer. Under an agreement with Pfizer, the pharmaceutical giant is supplying its drug for the study at no cost to Zentalis, according to the filing. Zentalis is responsible for conducting the study and paying for it. The agreement does not give Pfizer the right to participate in future Zentalis clinical trials, and each company keeps rights to their respective drugs.

The Zentalis pipeline also includes ZN-c3 and ZN-e4, drugs in early-stage development for solid tumors and non-small cell lung cancer respectively. Preliminary data for those tests are expected in 2021. Another Zentalis compound, ZN-d5, is an experimental treatment for B-cell lymphoma. In the first half of this year, the company plans to seek FDA clearance to begin clinical testing of that drug. Zentalis says in the prospectus that it will use the IPO proceeds to continue development of its three clinical-stage compounds and to advance its B-cell lymphoma drug to human testing.

Since its 2014 founding, Zentalis has raised $162.1 million, according to the filing. The most recent financing was an $85 million Series C round that closed in December. As of the end of last year, the company had $67.2 million in cash. Its largest shareholders include Recurium Equity, Matrix Capital Management Master Fund, and Viking Global Investors. The percentage of Zentalis held by those shareholders is more than 5 percent, but the exact amount was not disclosed.


In other biotech IPO developments, Lyra is preparing for an IPO to finance clinical development of treatments for diseases affecting the ear, nose, and throat. The Watertown, MA-based company’s proprietary technology, XTreo, is an implantable drug delivery device intended to precisely and consistently deliver medicine to affected tissue in a single dose that lasts months. The company’s lead therapeutic target is chronic rhinosinusitis, an inflammatory condition affecting the sinuses.

The Lyra drug delivery technology has three components. A biocompatible mesh scaffold maximizes the surface area for the release of a drug. A matrix of polymers that have elastic properties gives the implant “shape memory” to adapt to nasal passages. The third component is a polymer-drug complex, which the company says can be customized to release the desired dose of a drug at a certain rate.

Lead program LYR-120 uses the Lyra technology to administer mometasone furoate (MF), a steroid that is the active ingredient in several medications approved to treat runny and stuffy noses caused by allergies. In severe cases, chronic rhinosinusitis can be treated by sinus surgery. Lyra is developing LYR-120, which can be quickly implanted during a brief physician’s visit, as an alternative to such surgery. The therapy is intended to last up to six months. Preliminary Phase 2 data are expected in the first quarter of 2021.

A second program, LYR-220, is being developed for treatment of chronic rhinosinusitis in patients who have undergone sinus surgery but continue to need treatment to manage their symptoms. The company aims to start a proof-of-concept clinical trial for LYR-220 by the end of 2021. Lyra believes its technology could address other diseases, though those conditions weren’t specified in its IPO filing. Lyra says that it plans to apply the IPO proceeds toward clinical development of LYR-120 and LYR-220, as well as for additional research and development.

Lyra’s largest shareholder is Perceptive Advisors, with 32.4 percent, followed by North Bridge Venture Partners with 17.3 percent, according to the filing. The company has set a preliminary $57.5 million goal for its IPO. If it completes the stock offering, the company’s shares will trade on the Nasdaq exchange under the stock symbol “LYRA.”

Meanwhile, Israel-based Ayala is planning an IPO to finance mid-stage tests of two drugs it licensed from Bristol Myers Squibb (NYSE: BMY).

Ayala’s lead drug candidate, AL101, is an injectable small molecule intended to block gamma secretase, an enzyme that activates the Notch signaling pathway, which is involved in both solid tumors and blood cancers, the company says in its IPO filing. In 2017, Ayala licensed the compound from Bristol, which had tested the drug in three Phase 1 studies. Those clinical trials were not successful, but Ayala notes clinical activity was observed in cancers in which Notch activation drove the disease.

AL101 is currently in Phase 2 testing in adenoid cystic carcinoma, a rare form of adenocarcinoma, a type of cancer affecting glandular tissue. The drug is also being developed for triple-negative breast cancer and T cell acute lymphoblastic leukemia, a rare form of T cell specific leukemia.

The second Ayala program from Bristol, AL102, is also a gamma-secretase inhibitor. Ayala is preparing to start Phase 2 tests of the drug as a treatment for desmoid tumors, which occur in connective tissue. The company is also collaborating with Novartis (NYSE: NVS) to develop AL102 as a treatment for multiple myeloma by itself and with the pharmaceutical giant’s B-cell maturation antigen therapies.

Ayala’s largest shareholder is the Israel Biotech Fund, which holds a 35.5 percent stake, according to the filing. Ayala says it will use the IPO cash to finance mid-stage tests of AL101, and to advance AL102 into Phase 2 testing. Ayala set a preliminary $50 million target for the IPO. The company has applied for a listing on the Nasdaq under the stock symbol “AYLA.”

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