- Jounce Therapeutics will lay off 57% of its workers and combine with U.K.-based Redx Pharma in a reverse merger that will create a company focused on medicines for cancer and fibrotic disease.
- If shareholders approve the deal, Redx shareholders would own 64% of the combined company after a share exchange and reverse split. The combined company, which would carry an implied valuation of $425 million, will be listed as REDX on the Nasdaq stock exchange following the deal’s closing.
- The companies expect the all-share merger to be completed in the second quarter. Forty-seven Jounce employee in research and development will be retained and based in Massachusetts, but Jounce’s current clinical programs will not be advanced beyond ongoing studies.
The deal would bring to an end Jounce’s decade-long run as an up-and-coming cancer immunotherapy biotechnology company. Its lead candidate, an antibody aimed at triggering an immune response by T cells against solid tumors, was the centerpiece of a lucrative deal signed with Celgene in 2016. But the drug, called vopratelimab, faced multiple clinical setbacks and last year, after Phase 2 trial results showed it failed to shrink tumors, the company began to review whether the drug was worth the investment.
The verdict, revealed by Jounce in a statement on its restructuring late Wednesday, is that the company does not believe it can advance its two drug programs on its own. Clinical data for its two experimental drugs — the other aimed at activating macrophages against immune-suppressive tumors — “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,” Jounce CEO Richard Murray said in the statement.
Redx CEO Lisa Anson will lead the combined company after the merger, which the two companies announced in separate statement early Thursday.
Redx, a small British biotech, escaped bankruptcy in 2017 selling an experimental cancer drug to Loxo Oncology for $40 million. That drug, called Jaypirca and now owned by Eli Lilly after it acquired Loxo, won U.S. regulatory approval last month for a type of advanced lymphoma.
After the merger, Redx will prioritize development of its selective ROCK2 inhibitor, called RXC007, now in a Phase 2a trial in idiopathic pulmonary fibrosis. Topline data for the trial is expected in the first quarter of 2024. U.S. regulators recently put the trial under a partial clinical hold for its longer-term dosing until they receive additional non-clinical data.
Redx also has a lead cancer drug candidate, a Porcupine inhibitor called RXC004, that is aimed at treating Wnt-ligand dependent cancers is in Phase 2 trials, and another ROCK inhibitor for a type of Crohn’s disease that is expected to enter clinical trials in the first half of 2024.
Under the merger agreement, Jounce shareholders will receive a non-tradable security known as a contingent value right, or CVR, that would pay them 80% of proceeds from any sales or licensing deals for Jounce drug programs up to a year after the merger, unless extended under certain circumstances.
Jounce expects to substantially complete its layoffs by the end of March and incur a charge of around $11 million for the restructuring. After spending on closing costs for the merger, Jounce expects to contribute at least $130 million in cash to the combined company, which with Redx’s cash holdings, the companies said should give them an operating runway into the second half of 2025.