As fairy-tale biotech stories go, this is up there: You’re a small, ambitious startup getting a healthy $30 million series A round. Fast-forward less than a year, and you’re being bought for a quarter of billion dollars upfront.
That’s the story (PDF) of little Modis, which only came into life last October with its series A led by F-Prime Capital Partners and OrbiMed. Joshua Grass, former F-Prime entrepreneur-in-residence and head of corporate development at BioMarin Pharmaceutical, became its chief.
Usually you would expect B and C rounds, and then maybe a flirtation with an IPO if not holding out for a buyout: a game that plays out for years. But Modis has in its 10-month life span snapped up by Zogenix, which now gains access to its midstage drug MT1621 with a FDA "breakthrough" tag for patients with thymidine kinase 2 deficiency (TK2d).
TK2d is a genetic disorder that results in mitochondrial dysfunction, leading to faltering energy production in cells. TK2d can hit at any age and causes progressive and severe muscle weakness as well as respiratory insufficiency and is often fatal, with no drugs for the disease. MT1621 works as a deoxynucleoside combo therapy that targets the underlying pathophysiology of TK2 deficiency.
There has been one red flag in testing, however, with Modis recently reporting that two patients from its phase 2 test pulled out of the trial after serious safety issues. “Two adult-onset patients stopped treatment due to asymptomatic increases in aminotransferases, without increases in bilirubin, which resolved upon discontinuation of treatment,” the biotech noted in its release today.
Zogenix is gambling $250 million, plus $100 million for FDA approval and $50 million for an European Medicines Agency green light (with 5% royalty payouts on any future net sales), that the drug can get over the finish line and that the safety issues aren’t too serious.
“Zogenix shares our deep commitment to improving treatment options for patients with rare diseases,” said Grass. “This transaction reflects the strategic value of Modis and the results we have achieved with MT1621 to date, and we are confident that Zogenix is ideally positioned to complete development and bring MT1621 to patients in need as expeditiously as possible.”
It’s been a smooth path for Modis’ corporate strategy, but much more of a roller coaster for Zogenix: Last July, the company was riding high on positive phase 3 data for Fintepla, its treatment for Dravet syndrome, a rare form of childhood epilepsy.
But nine months later, back in April, the FDA has refused to consider Fintepla’s new drug application, not only because it was missing some studies but also because it included some clinical data that shouldn't have been there—a mistake that essentially stopped the review in its tracks.
Its shares took a big hit, riding at around $55 in early 2019 before slumping on the FDA refusal down to $36 a share. It picked up over the summer, helped by the FDA allowing it to resubmit after its blunder, and has almost recovered to its pre-April highs for the year.
But today it rowed back again, with its buyout of Modis not seemingly sitting well with investors this morning and its shares in the red by more than 11%.