Alzheon, a Framingham, Massachusetts-based biotechnology company focused on Alzheimer’s disease, is looking to raise USD 50m in a Series C capital round this year to advance clinical trials, according to CEO Martin Tolar.

The fundraising comes after the company cancelled an IPO in January for a second time amid tepid investor appetite for Alzheimer’s developmental assets, said Tolar in an interview.

The cognition-wasting disease has proven to be one of the most difficult challenges in drug development, with dozens of drugs in advanced development failing in recent years, erasing billions of dollars of investment.

Most notably, Biogen [NASDAQ:BIIB] and Eisai [4523.T] in March discontinued joint late stage clinical trials of aducanumab, considered one of the most promising potential Alzheimer’s treatments. Biogen shares fell by over 30% on the news and have yet to recover.

Similarly, Novartis [NYSE:NVS] and Amgen [NASDAQ:AMGN] in July said they ended two clinical trials of a drug called umibecestat after it found some patients fared worse in cognitive function. Roche [ROG.SW] in January also ended Phase 3 clinical trials of another drug called crenezumab, although it is continuing Alzheimer’s trials for a treatment called gantenerumab.

Alzheon is betting that its treatment, called ALZ-801, could succeed where others failed because it uses a different molecular mode of action than others. It has just kicked off the capital raise to start Phase 3 clinical trials in 2H19.

The US Food and Drug Administration has cleared the company to start trials in about 300 mild-to-moderate Alzheimer’s patients, he said.

Tolar said he anticipates investor skepticism for the fundraise. “Most of these guys are gun-shy,” said Tolar of investors. “There is so much blood on the floor.”

He said when he launched the company six years ago, there were 40 Alzheimer’s drugs in advanced development, but “every single one failed.”

Framingham, Massachusetts-based Alzheon has raised over USD 30m since founding from investors including Ally Bridge Group,Opaleye Management and Aptus Therapeutics, according to its investor deck.

It first filed to go public in March 2018 in an offering led by Citigroup to raise USD 80m, but withdrew it two months later, according to SEC filings. Last September, it filed a second time to raise USD 43m in an offering led by boutique investment
bank ThinkEquity, but withdrew that for undisclosed reasons in January.

Tolar said he withdrew the IPOs on the view that upcoming major clinical trial results by big pharmaceutical companies would fall short and severely dampen investor appetite, a view that turned out to be correct.

“We got a sense that these things are failing,” he said.

The company, however, contends that ALZ-801’s different mode of action in potentially inhibiting Alzheimer’s can succeed in a market that the drug industry views as a major, multi-billion dollar opportunity.

Some 5.8 million people in the US alone have Alzheimer’s, costing around USD 277bn in direct healthcare costs, according to the Alzheon investor deck. No new Alzheimer’s drug has been approved for 16 years and the only treatments on the market treat the symptoms, not the underlying disease.

“It’s an incredible opportunity and the science is there, but the track record is abysmal,” said Tolar.

Tolar said the company plans to revisit the idea of an IPO possibly next year when it expects interim results of the planned Phase 3 clinical trials. He said the company has been approached by large pharmaceutical companies for potential partnerships or an acquisition, but said so far none is willing to pay what he thinks the company is worth.

Tolar said Alzheon is not using a bank to help with the capital raise, but is using undisclosed advisors.

Tolar pointed out that ALZ-801, or tramiprosate, has already undergone extensive Phase 3 clinical testing through its previous owner, Quebec-based Bellus Health, formerly Neurochem.

Alzheon acquired the rights to tramiprosate in 2013, but is narrowing the focus of upcoming drug trials to include patients with certain genetic traits that have the most promising signals for efficacy, according to SEC filings.

While late stage clinical trials can cost hundreds of millions of dollars, Tolar said the company will rely partly on previous clinical trial data for its Phase 3 testing, obviating the need for a larger fundraising.

by Dane Hamilton

Source: Mergermarket