On August 2, 2023 Surface Oncology (Nasdaq: SURF), a clinical-stage immuno-oncology company developing next-generation immunotherapies that target the tumor microenvironment, reported financial results and corporate highlights for the second quarter 2023 (Press release, Surface Oncology, AUG 2, 2023, View Source [SID1234633662]).
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"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 BioSciences
As 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 Milestones
Surface 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 Results
As 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 SRF388
SRF388 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 SRF114
SRF114 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.