In a series of unfortunate turns, Evelo Biosciences, a biotech company backed by Flagship Ventures and that went public in 2018, has encountered substantial challenges over the past year. Their lead candidate faltered in clinical trials, and now their next-generation asset has performed worse than a placebo in a phase 2 psoriasis trial, prompting the company to initiate a search for strategic alternatives.
Evelo’s journey, built on the premise of leveraging orally administered microbial strains to modulate immune pathways within the gut, aimed to intervene early in inflammatory diseases like eczema and psoriasis. However, the credibility of this approach has taken a significant hit in recent months.
Even after the failure of their lead candidate in eczema, Evelo pinned its hopes on the potential of EDP2939, their next-generation drug candidate. Regrettably, phase 2 data on EDP2939 have dashed those hopes. In the trial, patients with moderate psoriasis were randomized to receive either EDP2939 or a placebo. After 16 weeks, it was observed that 19.6% of patients on EDP2939 achieved a PASI-50 response (a 50% or greater reduction in symptoms), but here lies the challenge: 25% of individuals on the placebo displayed the same level of response. This failure to outperform the placebo caused the clinical trial to miss its primary endpoint.
Evelo attempted to highlight the PASI-50 rates at Week 20, where EDP2939 showed some improvement over the placebo. Nevertheless, the 33.9% to 26.9% result favoring the study drug at this later time point failed to appease investors, leading to a substantial 44% drop in Evelo’s premarket trading share price, now at $1.62.
In response to this latest setback, Evelo is actively exploring strategic alternatives. The company has identified EDP1815, their previously failed lead candidate, and the Sintax small intestinal axis platform as potential assets that could attract partners. Additionally, Evelo’s Nasdaq listing offers the possibility of a reverse merger, though this option is complicated by the company’s challenging financial position.
The financial landscape presents a considerable hurdle for Evelo, as they seek to address their cash-flow challenges with mergers and partnerships. While subsequent deals have generated $25.5 million and reduced their debt by $10 million, Evelo remains in a precarious financial position, with $7.6 million in cash and $43.9 million in debt as of June. Consequently, Evelo Biosciences is navigating turbulent waters, with an uncertain path forward as they strive to overcome these substantial obstacles.
