Finch Therapeutics’ lead microbiome therapy has reached Phase 3 testing as a potential treatment for a serious and potentially fatal intestinal infection, but challenges in study enrollment and financial difficulties have led the biotech to terminate the program and instead find ways to monetize its remaining assets.
The corporate restructuring will result in the layoff of 77 employees, representing about 95% of the workforce, according to a regulatory submission. Shares of Somerville, Mass.-based Finch opened Tuesday at 56 cents a share. When Finch raised $127.5 million in its 2021 IPOthe biotech company valued its shares at $17 each.
Finch’s lead program, CP101, was in development for the treatment of relapse Clostridioides difficile infection. While standard antibiotics can kill these bacteria, the infection often returns, and when it does, there aren’t many other treatment options. Repeating C. misc infection leads to hospitalization and can be fatal. CP101 contains a diverse community of microbes designed to restore a patient’s microbiome to a healthy balance.
The past year has been tough for Finch. nearly a year ago, The FDA placed a clinical hold on the phase 3 study of CP101. The agency asked Finch for more information about the company’s SARS-CoV-2 screening protocols. The FDA previously raised concerns about the potential risk of transmission of SARS-CoV-2 through feces used for faecal microbiota transplants. CP101 is made with microbes obtained from stool samples of healthy donors. Finch describes his therapeutic candidate as offering the biology and activity of fecal microbiota transplants, but in oral capsule form.
Finch decided on clinical retention and dosing resumed in October. But the company faced other setbacks. Takeda Pharmaceutical, a partner in the development of potential microbiome therapies for ulcerative colitis and Crohn’s disease, announced last August that it would terminate the alliance before either program enters a clinical trial. The Japanese pharmaceutical giant said the decision was made after reviewing the project. Finch subsequently held his own pipeline overviewprompting the company to seek partners for an inflammatory disease therapy candidate and halt plans for a Phase 1 trial testing its microbiome therapy for autism spectrum disorder.
Finch ended the third quarter of 2022 with a cash position of $85.3 million, which the company believes will be sufficient to sustain operations over the next 12 months. But a new financial obstacle arose. At the end of 2022, Nasdaq notified Finch that its shares are at risk of delisting because its shares have closed below the minimum price requirement of $1 for 30 consecutive days. Nasdaq gives companies six months to regain compliance, but by then a competing microbiome therapy may already be on the market. Oral C. misc microbiome therapy from Seres Therapeutics is under FDA review with a regulatory decision expected in April.
Finch said he expects CP101 to have preliminary Phase 3 results in the first half of 2024. The change in strategy means those data will not materialize. The company and its board of directors chose to restructure, citing factors that included the prospect of securing more capital or partnerships to fund CP101’s clinical development, a slower-than-expected entry into Phase 3 and the damaging effects of the ongoing unresolved use of the company’s intellectual property.
Most of the job cuts will take place in February, with the remaining employees remaining until May to support the company’s change in strategy. Finch estimates it will incur about $4.1 million in restructuring costs related to one-time benefits and related expenses.
“These were very difficult decisions that we decided were necessary after carefully considering a number of factors and challenges facing Finch,” CEO Mark Smith said in a prepared statement.
Public domain image from CDC