Evelo Biosciences is dissolving. One month after starting a search for strategic alternatives, the Flagship Ventures-backed microbiome biotech has found its only option is to close its doors and hand any cash to creditors.
The biotech, which has suffered a series of setbacks over the past 18 months, outlined its plans in a Securities and Exchange Commission filing. After failing to find funding or other ways to keep going, the board identified the dissolution of the business as the only viable option. The board sees closing as Evelo’s best shot at paying its creditors and potentially returning some cash to shareholders.
Simba Gill, Ph.D., and Marella Thorell, respectively the CEO and chief financial officer at Evelo, are leaving the company along with all seven members of the board. The pair survived the 45% reduction in head count that Evelo enacted in January along with further cuts it made in the second quarter.
Craig Jalbert, an insolvency expert, will oversee the dissolution process. Evelo has tasked Rock Creek Advisors with helping identify strategic alternatives to help monetize its assets, which were once seen as highly promising.
VC shops including Flagship, GV and Celgene anointed Evelo as a biotech with the potential to realize the therapeutic promise of the microbiome, committing cash across private rounds and propping up its $85 million IPO. Going into 2022, the biotech was testing its belief that orally administered microbial strains can up- or down-regulate immune pathways across studies of three drug candidates.
All of the candidates disappointed. Work on EDP1867 stopped in April 2022 after it failed to impress in a phase 1 atopic dermatitis trial. Another atopic dermatitis candidate, EDP1815, flunked a phase 2 clinical trial early this year. The last asset left, EDP2939, recently performed worse than placebo in psoriasis.
Evelo tapped Horizon Technology Finance Corp. for a $45 million loan to fund its pipeline through the data drops in 2023. Talking to investors in March, Horizon President Gerald Michaud cited Evelo’s platform technology and multiple clinical trials, plus Flagship’s support, as reasons to think the biotech could overcome the setback in atopic dermatitis. Horizon, like Flagship, moved to sell stock in August.
The clinical development programs fell away one by one, leaving Evelo in June with a once-hyped platform that was tarnished by the flops as well as $7.6 million in cash and $43.9 million in debt. The biotech later added cash and reduced its debt but in the end was unable to secure its financial future.