Last fall, a late-stage brain cancer flop prompted Tocagen to cut 65% of its workforce to stay afloat. Now, out of options, the one-time cancer specialist will become Forte Biosciences’ route to the public markets.
The duo announced Wednesday that they would merge in an all-stock deal. Forte CEO Paul Wagner, Ph.D., will lead the combined company, which will work on Forte’s clinical-stage skin disease pipeline, including a late-phase program in atopic dermatitis, or eczema.
“Following an extensive review of strategic alternatives, we believe that this merger with Forte is in the best interest of Tocagen’s stockholders and has the potential to deliver immediate and long-term value to the stockholders,” said Tocagen CEO Marty Duvall in a statement Wednesday. “The strength and dedication of the Forte leadership team, combined with their highly differentiated technology platform and enthusiastic support from leading clinicians, provides a compelling foundation for future success for all stakeholders, and they have our full support.”
Tocagen’s stock nearly doubled since the announcement, but that’s not saying much as it’s been floating around the 50-cent mark since its layoffs in October.
The company reported in September that its lead candidate, a gene therapy called Toca 511 and Toca FC, failed a phase 3 study targeting patients with recurrent high-grade glioma undergoing surgery to remove their tumor. The gene therapy didn’t extend patients’ lives over standard of care, missing its primary endpoint. And if that weren’t bad enough, all secondary endpoints “showed no meaningful difference between the arms of the trial,” the company said at the time.
The merger is slated to close in the second quarter, after which an investor syndicate including OrbiMed, Alger and BVF Partners will invest $14 million. That will bring the company’s war chest to $25 million as it looks to advance its lead asset, FB-401, and other clinical programs. Forte expects to start a phase 2 study of FB-401, a live biotherapeutic, by the middle of the year.
The pair didn’t mention Tocagen’s gene therapy in the statement. But the combined company could choose to license or sell off “Potentially Transferable Assets,” including the “tangible and intangible assets used in or related to Toca 511, Toca FC, the RRV [retroviral replicating vector] platform, cell lines, reagents and assays, in Vivo Car-T Technology, and immortal MSC technology,” they said (PDF) in a securities filing.