Jitters over prospects with any candidate in Alzheimer's disease (AD) failed to deter investors from putting up to $30.8 million into Transition Therapeutics Inc., which not only has AD work ongoing but also a phase II trial in type 2 diabetes with heavyweight partner Eli Lilly and Co.
In the financing, a group that comprises Jack Schuler, Larry Feinberg, Oracle Investment Management, certain Transition board members, management and other existing shareholders will buy about 3.1 million units of the company at a price of $5.32 each.
Each unit consists of one common share and 0.61 of a common share purchase warrant, with a purchase price of $7.10 per whole warrant, and each whole warrant will entitle the holder, within two years from closing, to buy one more common share. Transition gets $17 million when the transaction closes (expected to happen June 20) and the exercise of all warrants that could add $13.8 million.
With Indianapolis-based Lilly, Transition, of Toronto, is developing TT-401, an oxyntomodulin analog with dual agonist activity at the glucagon-like peptide-1 and glucagon receptors, undergoing comparison with Lilly's exenatide (Bydureon) in the phase II trial that started last month.
The paired effects of TT-401 allow for development in weight management as well as type 2 diabetes. Specifically, the randomized, double-blind, placebo-controlled study compares four doses of once weekly TT-401 to once weekly exenatide extended-release or placebo.
The trial includes a 12-week blinded treatment period, in which neither the participant nor the investigator knows which treatment the patient has been assigned. Next comes a 12-week period (weeks 13-24), during which enrolled subjects and the investigator will know which treatment continues to be given. Participants on TT-401 and on once-weekly exenatide will continue treatment through weeks 13-24, and those getting placebo will be followed without treatment.
Main efficacy outcome measures will be the change in HbA1c at week 12 and 24 and change in body weight over the course of the study. Data should be available next year.
Transition gained rights to TT-401 from Lilly, advanced it through proof-of-concept work, and handed the compound back to Lilly for later-stage experiments in 2013, per their agreement. Under the terms of the 2008 pact, Transition collected a $7 million up-front payment, with the promise of as much as $240 million more if development and sales milestones are reached. An earlier diabetes program with the gastrin analog TT-223 failed its phase II trial in September 2010. (See BioWorld Today, March 17, 2008.)
In AD, specifically agitation and aggression that comes with the disease, as well as Down syndrome, Transition has, also at the phase II stage, the oral small molecule ELND005 (scyllo-inositol), designed to break down neurotoxic fibrils and allow amyloid peptides to clear the body rather than form amyloid plaques. Transition and Elan Corp. plc, of Dublin, partnered in 2006 to develop and commercialize ELND005 in a deal worth up to $200 million, but then Perrigo Co., also of Dublin, bought Elan and re-prioritized the asset. Transition now retains all rights. (See BioWorld Today, Sept. 28, 2006, and July 30, 2013.)
Lately, Transition's had its ups and downs. The company in April lost about 40 percent of its value, though RBC Capital Markets analyst Douglas Miehm wrote in a research report that "the shares had been overvalued due to the shift in timelines for [reporting] clinical results, inherent risk of running AD trials, cancellation of the bipolar [disorder trial with ELND005] and the likely need for additional financing."
Transition said in its third-quarter fiscal 2014 results that the bipolar study would be discontinued "following a commercial assessment of the size and length" of the experiment. "This decision was not based on any analysis of efficacy data and there were no adverse safety findings that contributed to this decision," the company added.
Miehm wrote that "a few items" could make him rethink his view of Transition, such as Lilly backing out of the TT-401 program, "although this is quite unlikely." Enrollment in the AD trial could be delayed, and the company might make more investments that would raise the cash burn. On the upside, positive Down syndrome results may roll out in the third quarter of this year. Before the latest financing, Transition had about $36 million in cash, more than a year's worth, by Miehm's estimate.
Transition's stock (NASDAQ:TTHI) closed Friday at $5.50, the same as the previous day's close.