Third Rock’s Eleven plots turnaround--or investor payout--via Roche deal

roche building

Preclinical micro-cap Eleven Biotherapeutics ($EBIO) is working to regain some momentum after its lead dry eye disease candidate failed in Phase III testing early this year. It hopes to press the reset button by refocusing on a Roche ($RHHBY) deal that could continue to offer infusions of cash.

But it’s still keeping all its options open, considering a partnership, merger or divestiture of non-Roche-related assets. Simply distributing any Roche partnership payments to shareholders is also on the table if no transactions along those lines result.

The Cambridge, MA-based biotech disclosed the Roche partnership this June and stands to receive an upfront of $7.5 million. Then in July, it said it stands to receive a $22.5 million milestone payment from the pharma as the IND became effective for a Phase I study of the partnered ocular disease candidate EBI-031, a humanized monoclonal antibody that binds interleukin-6 and inhibits IL-6 cytokine signaling.

All this will be considered at an upcoming Aug. 15 shareholder meeting, including a final ratification of the Roche partnership. Eleven shares gained more than 10% in early trading on Aug. 12 to hit a meager market cap of about $90 million.

“We look forward to closing our licensing deal with Roche, contingent upon the approval of our stockholders at our upcoming stockholder meeting,” said Eleven CEO Abbie Celniker in a statement.

The EBI-031 IND covers Phase I clinical trials in diabetic macular edema (DME) and uveitis. Roche can buy out rights to the drug at a couple of points in its development, paying $135 million after a Phase II trial start but before Phase III, or $265 million before a regulatory filing is accepted for review.

If Roche doesn’t buy EBI-031 from Eleven but continues with the partnership instead, the biotech stands to receive a total of $262.5 million in milestone payments along the way including $20 million on a Phase II start, $30 million on a Phase III start, $25 million on a U.S. regulatory filing, and $40 million on a U.S. launch. Eleven also stands to get 7.5% to 15% on net sales of any products containing EBI-031, a rate that escalates annually over a four-year period.

Eleven was founded in 2010 by Flagship Ventures and Third Rock Ventures as an ambitious effort to engineer protein therapeutics to address a wide variety of disorders including inflammatory conditions and coagulation disorders. It raised $55 million in venture capital.

Six years later, Third Rock and Flagship are still the main shareholders in the company, even after a mediocre IPO in 2014 that raised $50 million. Third Rock held 24.2% at June 30, while Flagship held 16.8%.

- here is Eleven's Q2 earnings release
- and here is a detailed SEC filing

Related Articles:
Struggling Eleven Bio cashes out of 2nd drug in $270M Roche deal
Slow death of Eleven Bio continues as 70% of staff axed
Biotech vet Abbie Celniker takes helm at Eleven Biotherapeutics
Third Rock's Eleven Bio flunks a Phase III dry eye study
Third Rock's Eleven pitches a $69M IPO to fuel its PhIII dry eye program