Eliem drops depression drug, ending pursuit of Biogen-Sage and laying off 55% of team

How many years of cash runway do biotechs need to feel comfortable? Two? Three? Eliem Therapeutics has decided its two years of cash looks dicey in the current capital environment—and has responded by shelving a phase 2-ready depression drug candidate and laying off 55% of staff in a pivot to preclinical.

Eliem put itself on the map in 2021 when it exited stealth with $80 million, RA Capital management in its corner and clinical-phase pain and depression prospects in its pipeline. Less than two months later, Eliem added a further $60 million to its coffers and, before the year was out, had raised another $92 million in an IPO.  

The biotech’s whirlwind rise has given way to a sustained slump. Eliem dropped its lead pain program in August after failing a phase 2a clinical trial. With its stock down 65% over the past year, it has now decided to stop work on its next most advanced candidate, ETX-155.

In October, Eliem talked up the prospects of the GABAA receptor positive allosteric modulator in the treatment of major depressive disorder (MDD). The candidate is well behind a rival therapy, zuranolone, which is in development at Biogen and Sage Therapeutics and now has an FDA decision date set for August, but Eliem had best-in-class aspirations based on the lack of a clinically meaningful food effect and longer half-life.

Explaining its decision to drop ETX-155, Eliem blamed the “current capital market conditions and investor sentiment around the GABAA PAM opportunity in MDD.” Those factors led Eliem’s board to conclude its dollars are best spent on other programs. Eliem will stop preparations for a phase 2a trial of ETX-155.

The retreat from ETX-155 leaves Eliem focused on a preclinical Kv7.2/3 program. GSK and Valeant won approval for a Kv7.2/3 opener, branded Potiga, as an adjunctive treatment of partial-onset seizures in 2011 but pulled it from the market six years later after side effects stymied sales. Eliem thinks its understanding of the biology and selectivity can yield drugs with favorable safety and efficacy profiles. 

A phase 1 clinical trial of Eliem’s lead Kv7.2/3 candidate, ETX-123, is scheduled to start in the first half of next year. The biotech sees applications in epilepsy and pain, indications in which the mechanism was clinically validated by earlier drugs including Potiga, and potentially in depression. 

With the start of clinical development of ETX-123 still around one year away, Eliem no longer needs all of the employees it brought on board in anticipation of its phase 2a trial in MDD. The biotech grew its head count from 31 to 43 over the first nine months of last year. Now, 55% of employees are set to lose their jobs. By pivoting to ETX-123 and laying off staff, Eliem expects to extend the end of its cash runway from 2025 to 2027.

It wasn't enough to soothe investors, however, who drove the biotech’s stock down 10% to around $3 in premarket trading.