Heat to buy Pelican for preclinical cancer pipeline

Austin, Texas, where Pelican Therapeutics is based

Heat Biologics has struck a deal to buy a controlling stake in Pelican Therapeutics. The agreement will give Heat control of a preclinical immuno-oncology R&D program that is set to move an asset into phase 1 using some of the $15.2 million in grant funding Pelican secured last year.

Austin, Texas-based Pelican landed the grant and attracted the interest of Heat on the strength of its research into agonists of TNFRSF25, a costimulator linked to the expansion of regulatory T cells and the proliferation of CD8+ cytotoxic T cells. Pelican’s lead asset, PTX-25, is a monoclonal antibody designed to stimulate production of CD8+ T cells, a mechanism of action the drug developer and its incoming owner think will complement existing immuno-oncology therapies.

“Pelican’s PTX-25 has the potential to dramatically improve the durability of antigen-specific immune responses due to its preferential specificity for stimulating the production of ‘memory’ CD8+ T cells,” Heat CSO and senior VP of preclinical development Jeff Hutchins said in a statement. “We look forward to advancing these new product candidates with synergistic combinations including Heat’s existing T cell-activating platform technologies, ImPACT and ComPACT.”

Heat, a Durham, North Carolina-based biotech with a market cap of $22 million, will pay up to $500,000 upfront to Pelican stockholders as part of a deal to give it an 80% controlling interest in the firm. The company will also issue 1.3 million shares of its stock, which closed at $0.83 a share the day before news of the Pelican deal broke. Heat and Pelican have also built milestones, sublicensing income payments and loans into the terms of the deal.

RELATED: Heat Biologics to slash staff by a fifth, cut more than half of patients in cancer trial

The deal follows a tough few years for Heat. Having raised $25 million in an IPO in 2013, Heat has seen its stock price sink by 90% as it suffered setbacks including the failure of bladder cancer vaccine candidate HS-410 to beat placebo in a phase 2 trial. Heat laid off 22% of its staff in April in a bid to keep going past key readouts, including the aforementioned data from the phase 2 bladder cancer trial.

HS-410 and HS-110, a follow-up asset Heat tested in combination with Bristol-Myers Squibb’s Opdivo in non-small cell lung cancer last year, both use the ImPACT technology Hutchins sees meshing well with Pelican’s pipeline. ImPACT is a cell line engineered to express gp96, a heat shock protein Heat thinks turns the immune system against tumors.

Through buying Pelican, Heat gains control of an R&D operation that is set to advance a candidate into a 70-person phase 1 program using grant funding. 

Shares in Heat rose 18% in premarket trading.