On November 14, 2022 Sesen Bio (Nasdaq: SESN) reported operating results for the third quarter ended September 30, 2022, and provided a business update (Press release, Sesen Bio, NOV 14, 2022, View Source [SID1234623287]).
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Business Updates
On September 21, 2022, Sesen Bio announced that it had entered into a definitive merger agreement with Carisma Therapeutics (Carisma). The combined company will focus on the development of Carisma’s chimeric antigen receptor macrophage (CAR-M) therapies, which are believed to be the only therapies of their kind with demonstrated proof of mechanism and safety data in clinical trials.
Immediately following the merger, pre-merger Sesen Bio stockholders are expected to own approximately 41.7% of the combined company and pre-merger Carisma stockholders are expected to own approximately 58.3% of the combined company, in each case before giving effect to a $30.6 million concurrent financing by Carisma and the conversion into shares of common stock of the combined company of a $35.0 million outstanding convertible note from one of Carisma’s key strategic partners, Moderna.
Immediately prior to the closing of the merger, Sesen Bio stockholders of record as of a date agreed to by Sesen Bio and Carisma will be issued a Contingent Value Right (CVR) for each outstanding share of Sesen Bio common stock held as of such date, representing the right to receive contingent cash payments upon the receipt by Sesen Bio of certain proceeds payable by Roche, if any, related to the asset purchase agreement with Roche for EBI-031 and all other IL-6 antagonist monoclonal antibody technology (Roche Asset Purchase Agreement) subject to customary deductions, including for expenses and taxes.
The combined company is expected to have approximately $180.0 million in cash, cash equivalents and marketable securities at the closing of the merger, which is expected to advance Carisma’s pipeline through upcoming catalysts and development milestones across its clinical programs.
The combined company will be led entirely by Carisma’s current management team, which has extensive cell therapy experience and a strong track record in oncology and drug development. This includes Carisma CEO Steven Kelly, who was named Ernst & Young Entrepreneur of the Year 2022 Greater Philadelphia1, and Carisma Chief Scientific Officer and co-founder Michael Klichinsky, Pharm.D., Ph.D.
On July 18, 2022, Sesen Bio announced it was voluntarily pausing further clinical development of Vicineum in the US and that it intends to seek a partner to continue Vicineum’s development. Sesen Bio remains focused on closing the proposed transaction with Carisma while it continues to evaluate potential opportunities for Vicineum.
On November 1, 2022, Carisma announced the acceptance of multiple abstracts to be presented at the upcoming Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper) 37th Anniversary Annual Meeting in Boston, Massachusetts, which is being held November 8 to November 12, 2022. Accepted abstracts include two abstracts of its clinical trial data, including one for oral presentation, four abstracts of pre-clinical study data, and one abstract overviewing the design of a Phase 1 clinical trial for CT-0508.
Third Quarter 2022 Financial Results
Cash Position: Cash, cash equivalents and marketable securities were $184.9 million as of September 30, 2022, compared to cash and cash equivalents of $162.6 million as of December 31, 2021.
Total Revenue: Total revenue for the three months ended September 30, 2022 was $40.0 million, which was due to the execution of the Roche Asset Purchase Agreement.
R&D Expenses: Research and development expenses were $2.9 million for the three months ended September 30, 2022, compared to $5.0 million for the three months ended September 30, 2021. The decrease of $2.0 million was primarily due to a decrease in costs associated with manufacturing ($1.9 million) and a decrease in other R&D related costs ($0.1 million), driven by the strategic decision to voluntarily pause further development of Vicineum in the US in the third quarter of 2022.
G&A Expenses: General and administrative expenses were $8.1 million for the three months ended September 30, 2022, compared to $8.7 million for the three months ended September 30, 2021. The decrease of $0.6 million was primarily due to a decrease in marketing and commercialization expenses, which were incurred in preparation for potential commercial launch of Vicineum but were discontinued as a result of the Complete Response Letter (CRL) from the US Food and Drug Administration (FDA) received in August 2021 ($2.3 million) and a decrease in professional fees for accounting services ($0.4 million). This was partially offset by an increase in legal expense ($1.3 million), driven by legal fees associated with our assessment of strategic alternatives incurred in the third quarter of 2022 ($2.2 million), partially offset by a decrease in legal fees associated with the internal review ($0.4 million) and other legal expenses ($0.5 million). Additionally, financial advisor fees increased due to the Company’s assessment of strategic alternatives in the third quarter of 2022 ($0.8 million).
Restructuring Charges: Restructuring charges were $10.9 million for the three months ended September 30, 2022, compared to $5.5 million for the three months ended September 30, 2021. Restructuring charges for the third quarter of 2022 consisted of severance and other employee-related costs ($6.9 million) and termination of certain contracts and other associated costs ($4.0 million) associated with the restructuring plan approved on July 15, 2022, following the decision to voluntarily pause further development of Vicineum in the US. Restructuring charges for the third quarter of 2021 consisted of severance and other employee-related costs ($2.8 million) and termination of certain contracts ($2.7 million) associated with the restructuring plan approved on August 30, 2021, following the receipt of the CRL.
Non-Cash Related Expenses:
The Company did not record any intangibles impairment charge for the three months ended September 30, 2022, and the Company recorded an intangibles impairment charge of $31.7 million in the three months ended September 30, 2021. In light of the CRL, the Company performed an interim impairment test for In-Process Research and Development (IPR&D) assets, which resulted in the decrease in fair value of Vicineum’s US rights.
The non-cash change in fair value of contingent consideration was a gain of $1.8 million for the three months ended September 30, 2022, compared to a gain of $114.0 million for the three months ended September 30, 2021. The gain from the fair value of contingent consideration of $1.8 million for the three months ended September 30, 2022, was due to the Company’s conclusion that it no longer expects to make earnout payments to Qilu Pharmaceutical Co., Ltd. for commercialization of Vicineum in the Greater China region. Accordingly, the Company reduced the remaining $1.8 million of contingent consideration liabilities to zero as of September 30, 2022. The gain from the fair value of contingent consideration of $114.0 million for the three months ended September 30, 2021, was primarily due to management’s assessment of a lower probability of regulatory success of Vicineum, and a refinement of associated timelines, following the CRL.
Income Tax Benefit: The Company did not record a benefit or loss for the three months ended September 30, 2022. In the third quarter of 2021, the Company determined that the fair value of the Company’s intangible asset of Vicineum US rights was zero, which resulted in an impairment charge of $31.7 million. In connection with this impairment charge, in the third quarter of 2021, the Company reduced the associated deferred tax liability, which resulted in an income tax benefit of $8.6 million.
Net Income: Net income was $20.5 million, or $0.10 per basic and $0.10 per diluted share, for the third quarter of 2022, compared to $71.7 million, or $0.36 per basic and $0.36 per diluted share, for the third quarter of 2021. The decrease was primarily attributable to unfavorable changes in non-cash related expenses of $89.1 million (including tax benefit) and increased restructuring charges of $5.4 million. This was partially offset by revenue of $40.0 million related to the execution of the Roche Asset Purchase Agreement.
1: Award presented by Ernst & Young; winners are selected by a panel of independent judges based on their demonstration of long-term value through entrepreneurial spirit, purpose, growth and impact, among other core contributions and attributes.