Surface Oncology (Nasdaq: SURF), a clinical-stage immuno-oncology
company developing next-generation immunotherapies that target the
tumor microenvironment, today reported financial results and
corporate highlights for the second quarter 2023.
“We are pleased with the progress we have made over the past
several months which includes the advancement of the SRF388 and
SRF114 clinical trials and the significant efforts we have
undertaken towards completing our planned merger with Coherus
BioSciences,” said Rob Ross, M.D., chief executive officer of
Surface. “To truly realize the potential of SRF388 and SRF114, it
is essential that these molecules are developed with both the
resources and companion drugs needed to successfully advance them
through the clinic and bring them to the market. We firmly believe
that with Coherus, our programs will have the best possible
opportunity to benefit patients and realize value for our
shareholders.”
Proposed Merger of Surface Oncology and Coherus
BioSciencesAs announced on June 16, 2023, the proposed
merger will strengthen Coherus’ pipeline with global rights to two
innovative, competitively positioned, clinical-stage assets:
SRF388, the only IL-27 targeted antibody in clinical development
which has demonstrated activity as a monotherapy and in combination
with checkpoint inhibitors; and SRF114, a high affinity, fully
human antibody demonstrated to specifically bind to
CCR8. SRF388 and SRF114 have potential as monotherapy
and as combination treatments with other immuno-oncology agents,
including Coherus’ toripalimab.
In conjunction with the merger announcement, Surface conducted a
reduction in force that affected approximately 30 employees or 50
percent of the workforce. Surface anticipates it will have net cash
of $20 million to $25 million at the closing of
the proposed merger.
If the merger is not approved by shareholders, Surface
anticipates its remaining cash and cash equivalents will provide
runway through 2023, compared to its previous guidance of cash
runway into the second half of 2024. This reduced cash runway is a
result of expenditures related to the merger including repayment of
a $25 million loan and costs associated with the termination of the
lease at 50 Hampshire Street. If the merger does not close,
Surface’s board of directors intends to evaluate all viable
strategic alternatives including bankruptcy or dissolution
proceedings.
Near-term Corporate MilestonesSurface Oncology
will hold a Special Meeting of Stockholders on September 7, 2023,
to approve the merger with Coherus. A definitive proxy statement
was filed with the Securities and Exchange Commission and mailed to
all registered stockholders as of July 21, 2023, the record date.
The Surface Oncology board of directors unanimously recommends that
stockholders vote in favor of all proposals.
Financial ResultsAs of
June 30, 2023, cash, cash equivalents and marketable
securities were $56.3 million, compared to $124.8 million as of
December 31, 2022.
General and administrative (G&A) expenses were $8.6 million
for the second quarter ended June 30, 2023, compared to $6.4
million for the same period in 2022. The increase primarily relates
to an increase in legal and other professional fees related to the
proposed merger with Coherus. G&A expenses included $0.8
million in stock-based compensation expense for the second quarter
ended June 30, 2023.
Research and development (R&D) expenses were $13.8 million
for the second quarter ended June 30, 2023, compared to $18.2
million for the same period in 2022. This decrease was primarily
driven by a reduction in manufacturing costs for our SRF388 program
and the strategic decision to pause the SRF617 program as part of
our corporate restructuring in November 2022. R&D expenses
included $0.4 million in stock-based compensation expense for the
second quarter ended June 30, 2023.
Restructuring expenses were $3.2 million for the second quarter
ended June 30, 2023. The company did not record a
restructuring expense for the second quarter ended June 30,
2022. The increase relates to $2.3 million of severance and related
costs and $0.9 million of impairment charges related to laboratory
equipment that have been classified as held for sale.
For the second quarter ended June 30, 2023, net loss was
$28.2 million, or basic and diluted net loss per share of $0.46.
Net loss was $25.2 million for the same period in 2022, or basic
and diluted net loss per share of $0.46.
Surface projects that current cash and cash equivalents are
sufficient to fund the company through 2023.
About SRF388SRF388 is a fully human anti-IL-27
antibody designed to inhibit the activity of this immunosuppressive
cytokine. Surface has identified particular tumor types,
including liver and lung cancer, where IL-27 appears to play an
important role in the immunosuppressive tumor microenvironment and
may contribute to resistance to treatment with checkpoint
inhibitors. SRF388 targets the rate-limiting p28 subunit of IL-27,
and preclinical studies have shown that treatment with SRF388
blocks the immunosuppressive biologic effects of IL-27, resulting
in immune cell activation in combination with other cancer
therapies including anti-PD-1 therapy, as well as potent anti-tumor
effects as a monotherapy. Furthermore, Surface has identified
a potential biomarker associated with IL-27 that may be useful in
helping to identify patients most likely to respond to SRF388.
In November 2020, Surface announced that SRF388 was granted
Orphan Drug designation and Fast Track designation for the
treatment of refractory hepatocellular carcinoma from the United
States Food and Drug Administration.
About SRF114SRF114 is a fully human,
afucosylated anti-CCR8 antibody designed to preferentially deplete
CCR8+ Treg cells within the tumor microenvironment. In preclinical
studies, Surface has shown that SRF114 induces
antibody-dependent cellular cytotoxicity (ADCC) and/or
antibody-dependent cellular phagocytosis (ADCP) pathways to deplete
intratumoral Treg cells. In addition, SRF114 reduced tumor growth
in murine models. These findings support the advancement of SRF114
as a therapeutic candidate that holds the potential to drive
anti-tumor immunity in patients.
About Surface OncologySurface is an
immuno-oncology company developing next-generation antibody
therapies focused on the tumor microenvironment. Its pipeline
includes two wholly-owned programs; SRF388, a Phase 2 program which
targets IL-27, and SRF114, a Phase 1 program, which selectively
depletes regulatory T cells in the tumor microenvironment via
targeting CCR8. In addition, Surface has two partnerships with
major pharmaceutical companies: a collaboration with Novartis
targeting CD73 (NZV930; Phase 1) and a collaboration with
GlaxoSmithKline targeting PVRIG (GSK4381562, formerly SRF813; Phase
1). Surface’s novel, investigational cancer immunotherapies are
designed to achieve a clinically meaningful and sustained
anti-tumor response and may be used alone or in combination with
other therapies. For more information, please visit
www.surfaceoncology.com.
Forward-Looking Statements This communication
relates to the proposed transaction pursuant to the terms of the
Agreement and Plan of Merger, dated June 15, 2023, by and
among Coherus BioSciences, Inc. (Coherus), Crimson Merger Sub I,
Inc. (Merger Sub I), Crimson Merger Sub II, LLC (Merger Sub II),
and Surface Oncology, Inc. (Surface). This communication includes
express or implied forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended
(the Exchange Act), about the proposed transaction between Coherus
and Surface and the operations of the combined company that involve
risks and uncertainties relating to future events and the future
performance of Coherus and Surface. Actual events or results may
differ materially from these forward-looking statements. Words such
as “will,” “could,” “would,” “should,” “expect,” “plan,”
“anticipate,” “intend,” “believe,” “estimate,” “predict,”
“project,” “potential,” “continue,” “future,” “opportunity,” “will
likely result,” “target,” variations of such words, and similar
expressions or negatives of these words are intended to identify
such forward-looking statements, although not all forward-looking
statements contain these identifying words. Examples of such
forward-looking statements include, but are not limited to, express
or implied statements regarding: the business combination and
related matters, including, but not limited to, satisfaction of
closing conditions to the proposed transaction, prospective
performance and opportunities with respect to Coherus, Surface or
the combined company, post-closing operations and the outlook for
the companies’ businesses; prospective developments or results in
the pipelines of Coherus, Surface or the combined company and
expansion of Coherus’ I-O franchise; the prospects for approval of
toripalimab; Coherus’, Surface’s or the combined company’s targets,
plans, objectives or goals for future operations, including those
related to Coherus’ and Surface’s product candidates, research and
development, product candidate introductions and product candidate
approvals as well as cooperation in relation thereto; projections
of or targets for revenues, costs and other financial measures;
future economic performance; and the assumptions underlying or
relating to such statements. These statements are based on Coherus’
and Surface’s current plans, estimates and projections. By their
very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific. A number of important
factors, including those described in this communication, could
cause actual results to differ materially from those contemplated
in any forward-looking statements. Factors that may affect future
results and may cause these forward-looking statements to be
inaccurate include, without limitation: uncertainties as to the
timing for completion of the proposed transaction; uncertainties as
to Surface’s ability to obtain the approval of Surface’s
shareholders required to consummate the proposed transaction; the
possibility that competing offers will be made by third parties;
the occurrence of events that may give rise to a right of one or
both of Coherus and Surface to terminate the merger agreement; the
possibility that various closing conditions for the proposed
transaction may not be satisfied or waived on a timely basis or at
all, including the possibility that a governmental entity or
regulatory authority may prohibit, delay, or refuse to grant
approval, if required, for the consummation of the proposed
transaction (or only grant approval subject to adverse conditions
or limitations); the difficulty of predicting the timing or outcome
of consents or regulatory approvals or actions, if any; the
possibility that the proposed transaction may not be completed in
the time frame expected by Coherus and Surface, or at all; the risk
that Coherus and Surface may not realize the anticipated benefits
of the proposed transaction in the time frame expected, or at all;
the effects of the proposed transaction on relationships with
Coherus’ or Surface’s employees, business or collaboration partners
or governmental entities; the ability to retain and hire key
personnel; potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
proposed transaction; significant or unexpected costs, charges or
expenses resulting from the proposed transaction; the potential
impact of unforeseen liabilities, future capital expenditures,
revenues, costs, expenses, earnings, synergies, economic
performance, indebtedness, financial condition and losses on the
future prospects, business and management strategies for the
management, expansion and growth of the combined business after the
consummation of the proposed transaction; potential negative
effects related to this announcement or the consummation of the
proposed transaction on the market price of Coherus’ or Surface’s
common stock and/or Coherus’ or Surface’s operating or financial
results; the difficulty of predicting the timing or outcome of
regulatory approvals or actions; the risks that holders of the CVRs
will not receive payments in respect of the CVRs; uncertainties as
to the long-term value of Coherus’ common stock, including the
dilution caused by Coherus’ issuance of additional shares of common
stock in connection with the proposed transaction; unknown
liabilities related to Coherus or Surface; the nature, cost and
outcome of any litigation and other legal proceedings involving
Coherus, Surface or their respective directors, including any legal
proceedings related to the proposed transaction; risks related to
global as well as local political and economic conditions,
including interest rate and currency exchange rate fluctuations;
potential delays or failures related to research and/or development
of Coherus’ or Surface’s programs or product candidates; risks
related to any loss of Coherus’ or Surface’s patents or other
intellectual property rights; any interruptions of the supply chain
for raw materials or manufacturing for Coherus or Surface’s product
candidates, the nature, timing, cost and possible success and
therapeutic applications of product candidates being developed by
Coherus, Surface and/or their respective collaborators or
licensees; the extent to which the results from the research and
development programs conducted by Coherus, Surface, and/or their
respective collaborators or licensees may be replicated in other
studies and/or lead to advancement of product candidates to
clinical trials, therapeutic applications, or regulatory approval;
uncertainty of the utilization, market acceptance, and commercial
success of Coherus or Surface’s product candidates, and the impact
of studies (whether conducted by Coherus, Surface or others and
whether mandated or voluntary) on any of the foregoing; unexpected
breaches or terminations with respect to Coherus’ or Surface’s
material contracts or arrangements; risks related to competition
for Coherus’ or Surface’s product candidates; Coherus’ or Surface’s
ability to successfully develop or commercialize Coherus’ or
Surface’s product candidates; Coherus’, Surface’s, and their
collaborators’ abilities to continue to conduct current and future
developmental, preclinical and clinical programs; potential
exposure to legal proceedings and investigations; risks related to
changes in governmental laws and related interpretation thereof,
including on reimbursement, intellectual property protection and
regulatory controls on testing, approval, manufacturing,
development or commercialization of any of Coherus’ or Surface’s
product candidates; unexpected increases in costs and expenses with
respect to the potential transaction or Coherus’ or Surface’s
business or operations; and risks and uncertainties related to
epidemics, pandemics or other public health crises and their impact
on Coherus’ and Surface’s respective businesses, operations, supply
chain, patient enrollment and retention, preclinical and clinical
trials, strategy, goals and anticipated milestones. While the
foregoing list of factors presented here is considered
representative, no list should be considered to be a complete
statement of all potential risks and uncertainties. There can be no
assurance that the proposed transaction or any other transaction
described above will in fact be consummated in the manner described
or at all. A more complete description of these and other material
risks can be found in Coherus’ and Surface’s respective filings
with the SEC, including each of their Annual Reports on Form 10-K
for the year ended December 31, 2022, subsequent Quarterly
Reports on Form 10-Q and other documents that may be filed from
time to time with the SEC, as well as the Registration Statement on
Form S-4 which includes the proxy statement of Surface that also
constitutes the prospectus of Coherus, which proxy
statement/prospectus was mailed to Surface’s stockholders on or
about July 26, 2023. Coherus and Surface also plan to file other
relevant documents with the SEC regarding the proposed transaction.
Any forward-looking statements speak only as of the date of this
communication and are made based on the current beliefs and
judgments of Coherus’ and Surface’s management, and the reader is
cautioned not to rely on any forward-looking statements made by
Coherus or Surface. Unless required by law, neither Coherus nor
Surface is under no duty and undertakes no obligation to update or
revise any forward-looking statement after the distribution of this
document, including without limitation any financial projection or
guidance, whether as a result of new information, future events or
otherwise.
Selected Financial Information
(In thousands, except share and per share amounts) (Unaudited)
|
Three months ended June 30, |
|
Six months ended June 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
License-related revenue |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
30,000 |
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
|
13,831 |
|
|
|
18,198 |
|
|
|
27,608 |
|
|
|
34,822 |
|
General and administrative |
|
8,576 |
|
|
|
6,426 |
|
|
|
14,460 |
|
|
|
12,967 |
|
Restructuring charges |
|
3,234 |
|
|
|
— |
|
|
|
3,234 |
|
|
|
— |
|
Total operating expenses |
|
25,641 |
|
|
|
24,624 |
|
|
|
45,302 |
|
|
|
47,789 |
|
Loss from operations |
|
(25,641 |
) |
|
|
(24,624 |
) |
|
|
(45,302 |
) |
|
|
(17,789 |
) |
Interest and other income
(expense), net |
|
(2,551 |
) |
|
|
(589 |
) |
|
|
(2,631 |
) |
|
|
(1,225 |
) |
Net loss |
|
(28,192 |
) |
|
|
(25,213 |
) |
|
|
(47,933 |
) |
|
|
(19,014 |
) |
Net loss per share — basic and
diluted |
$ |
(0.46 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.79 |
) |
|
$ |
(0.37 |
) |
Weighted average common shares
outstanding — basic and diluted |
|
60,717,899 |
|
|
|
54,654,822 |
|
|
|
60,673,195 |
|
|
|
51,647,148 |
|
Selected Balance Sheet
Items |
June 30, 2023 |
|
December 31, 2022 |
Cash, cash equivalents and marketable securities |
$ |
56,258 |
|
$ |
124,823 |
Total assets |
|
66,006 |
|
|
159,910 |
Accounts payable and accrued
expenses |
|
7,340 |
|
|
10,470 |
Total stockholders’
equity |
|
49,178 |
|
|
93,403 |
Contact
Jessica Fees
Chief Financial Officer
jfees@surfaceoncology.com
Surface Oncology (NASDAQ:SURF)
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