Jounce Therapeutics is cashing out. Despite having more than $150 million in the bank, the struggling biotech has decided it lacks the means to advance its clinical candidates, leading it to lay off 57% of its staff and enter into a reverse merger with Redx Pharma.
The Massachusetts-based biotech delivered the one-two news punch as Wednesday rolled into Thursday on the East Coast. First, Jounce revealed it is reducing its workforce by around 57% and seeking business development opportunities for its two lead clinical programs, JTX-8064 and vopratelimab, in the belief it lacks the resources to show their value. CEO Richard Murray, Ph.D., set out the situation in a press release.
“We believe data in both the SELECT and INNATE clinical trials is intriguing, but to date, neither study has demonstrated clinical activity sufficient to create the value necessary for Jounce to independently advance these programs to the next stage of development,” Murray said in the release. “We believe a company with additional resources and a longer value creation timeline could potentially advance these programs.”
Jounce has been rocked by clinical setbacks in recent years that led investors to take a considerably more downbeat view on the pipeline programs’ prospects. Hours after revealing the layoffs, Jounce, with its stock trading below $1, disclosed plans to use its cash, Nasdaq listing and R&D capabilities to land itself a buyer.
British biotech Redx has taken the other side of the deal. Upon the completion of the merger, a new, Nasdaq-listed company, carrying Redx’s name and focused on its lead candidate, will emerge. Redx will retain 47 Jounce staff at a site in Massachusetts, giving it expertise in biologics and immuno-oncology, and add some discovery projects to its preclinical pipeline. Work on Jounce’s clinical candidates will stop.
Jounce expects to contribute at least $130 million to the combined group. Redx will use the cash, which pushes its runway out into the second half of 2025, to advance its ROCK2 inhibitor RXC007. The oral drug candidate is part way through a phase 2a trial in idiopathic pulmonary fibrosis. But with the FDA putting it on partial clinical hold pending nonclinical data, the readout recently slipped from 2023 to early 2024.
Redx has suffered a slew of problems in the past, notably when bankruptcy proceedings forced it to sell a BTK inhibitor program to Loxo Oncology for $40 million—with no milestones on the back end—in 2017. The British biotech faced more dark days over the following years as adverse events temporarily stopped an oncology trial and an attempted takeover involving Sam Waksal fell through.
Facing a cash crunch after Waksal walked, Redx turned to investment group Redmile for money—and set itself on a path that led to the Jounce merger. Redx strengthened its balance sheet through deals with AstraZeneca and Jazz Pharmaceuticals in 2020 and emerged as a clinical-phase biotech focused on a ROCK2 inhibitor. With Redmile now owning 73% of Redx, the fund has overseen the merger with Jounce.