Tocagen seeks $86M IPO to fund cancer gene therapy trial

Tocagen wants the IPO funds to bankroll trials of its brain cancer gene therapy.(Getty Images)

Tocagen has filed to raise up to $86 million in an IPO to take its breakthrough-designated brain cancer gene therapy combination through the first part of a phase 2/3 trial. The San Diego, California-based biotech expects to deliver data from the phase 2 in the first half of next year, having wrapped up enrollment last month. 

That trial is assessing the combination of gene therapy Toca 511 and prodrug Toca FC in patients with first or second recurrence of glioblastoma or anaplastic astrocytoma who are undergoing resection.

Subjects receive either standard of care or the Toca 511-Toca FC combination. Toca 511 is a retroviral replicating vector that encodes cytosine deaminase (CD). Its administration is intended to equip cancer cells to produce CD, a prodrug activator enzyme. Tocagen then gives patients the prodrug, Toca FC, an extended-release formulation of approved antifungal agent 5-fluorocytosine that is inactive until exposed to CD. Tocagen hopes Toca FC will cross the blood-brain barrier, be activated by CD and then kill both cancer cells and immunosuppressive cells.

Among the 24 patients who received the higher Toca 511 doses in a phase 1 and met the inclusion criteria for the phase 2/3, Toca saw three complete responses and two partial responses. At the time of the last data update, the responders were still alive 24 to 43 months after entering the study. The median overall survival for the 24 patients is 14.3 months.

The question facing Tocagen is whether that will translate into improved overall survival when the experimental regimen is pitted against standard of care options including Merck’s Temodal and Roche’s Avastin. Tocagen is hoping Wall Street will provide the money it needs to start to answer the question.

Tocagen is yet to set the terms for its IPO, but listed $86 million as its proposed maximum offering. A chunk of the anticipated haul is earmarked for manufacturing scale-up and validation of Toca 511 and Toca FC. Tocagen plans to set aside another tranche to complete the ongoing phase 2, leaving some cash left over to wrap up a phase 1b of the combination in other indications, including newly-diagnosed brain cancer and a clutch of other solid tumors.

If Tocagen hits its fundraising goal, the IPO cash will see it through at least the next 12 months, taking it up to the delivery of phase 2 data.

Tocagen has financed its progress to date through a series of low-profile venture rounds—most recently a $28.8 million investment in 2015—and by seeking donations via a brain cancer nonprofit.

Management must now persuade public investors to part with their cash. This year, Braeburn Pharmaceuticals and Visterra have both pulled IPOs after getting a frosty reception on Wall Street. Another company, ObsEva, hit its range but subsequently saw its stock slide. Tocagen will be hoping its experience has more in common with Jounce Therapeutics, which raised $102 million before seeing its stock go on a 30% tear in its first months on the market.

Jounce benefited from the starpower of a $2.6 billion pact with Celgene and a pitch that positions it at the forefront of the second wave of immuno-oncology. Tocagen lacks attributes with such pulling power, but in co-founder and R&D chief Harry Gruber, M.D. it has a name that could turn the heads of investors.

Gruber is gene therapy specialist who has played a role in getting a handful of biotechs started over the past 30 years, including Gensia and Viagene. Gensia ultimately became part of Teva through a $3.4 billion buyout, while Viagene accepted a $95 million bid from Chiron—now part of Novartis—after a bumpy few years trying to develop gene therapies in the early 1990s.