It has now been some time since Spark announced that they will terminate their development of the epilepsy project CG01. The global rights for the project will thus revert to CombiGene. Ingeneious contacted CombiGene’s CEO Peter Ekolind to find out how the terminated collaboration affects the company and what CombiGene’s strategy now looks like.
Let’s start with the most obvious question – what happens to the epilepsy project CG01 now?
“As everyone knows, the partnership with Spark is coming to an end. During the time that the collaboration has lasted, Spark has carried out a great deal of work that has moved the project forward. By January at the latest, the global rights for the project will revert to CombiGene and we will then have a basis for determining how to handle the project. CombiGene will not make any significant research or development investments in the CG01 project, but we will evaluate the conditions for finding a new strategic partner. At present, I cannot determine the likelihood that this will be successful, it is an assessment we will make when we have received the project back from Spark. If the conditions are right, we will definitely do what we can to find a new partner in Big Pharma.”
What consequences will the termination of the collaboration with Spark have for CombiGene’s strategy?
“Basically, our strategy remains unchanged. We will continue to work to in-license research assets, add value to them through solid preclinical work and then out-license them to a partner within Big Pharma and we are constantly looking for new projects to expand our project portfolio. The reason it’s important to work on multiple projects is obvious. There are many pitfalls during the development of a new drug. The product candidate may not be up to mark in terms of toxicology or efficacy. A licensee can suddenly change its strategic direction and leave an indication area, something that the now terminated agreement with Spark is a painful example of. Unfortunately, this is commonplace in all drug development and emphasizes the need to have a reasonably large project portfolio to create good chances of success. The more shots on goal we have, the more likely we are to succeed.”
Does this mean that the terminated agreement will not lead to any changes at all?
“Well, we’re going to make some changes in terms of the projects we’re looking for for in-licensing. There are different strategic paths to take when licensing a new project. If you choose a project that is in an early stage of development, the cost of in-licensing is relatively low, while the road to a finished preclinical package that can be offered to licensees in Big Pharma is relatively long. If you bring in a project that has come further in its development, the cost of in-licensing is significantly higher, at the same time the path to a finished preclinical package and thus potential out-licensing is significantly shorter.”
“Given the current situation with a harsh financial climate that has made it more difficult and expensive to raise money and, of course, the fact that we will no longer receive any additional compensation from Spark, we have narrowed down our search. We are now primarily looking for early projects that do not involve any substantial upfront payments and are not associated with any significant costs for us over the next 18 months, but do provide an opportunity for out-licensing and risk mitigation.”
Will the termination of the collaboration with Spark mean cost cuts at CombiGene?
“Not really, and the reason is simple. CombiGene has always been a very costeffective company. Our workforce amounts to a modest ten people and we use a minimal number of consultants. Our fixed costs for office space are very low – we rent four office rooms with two to three workplaces in each in the old AGA area on Lidingö, where the costs are a fraction of what equivalent premises would cost in Stockholm City. We also don’t have any lab or lab equipment that costs a lot of money every month. In fact, CombiGene doesn’t even own a microscope. All lab operations and manufacturing are carried out by subcontractors selected in competitive tenders. In other words, we have very limited opportunities to reduce our costs by less than significantly reducing the number of employees. This would, however, make it impossible to drive our projects and business development forward. CombiGene is not in a position where we can save our way to success. If we are to be successful, there is only one way to go: continued development of our projects and continued intensive business development to build an attractive project portfolio.”
Is there any way that CombiGene can strengthen its cash position without asking the company’s shareholders for additional capital?
“Absolutely. In fact, CombiGene has been very successful in raising non-dilutive capital. We have successfully raised soft money in various types of grants from Horizon 2020, Eurstars and Vinnova for both CG01 and CGT2. In total, the grants for these two projects amount to approximately SEK 47 million. To this can be added the upfront payment of almost SEK 90 million we received from Spark in connection with the out-licensing of CG01. In total, CombiGene has thus raised approximately SEK 137 million in non-dilutive capital. We have also applied for grants of approximately SEK 56 million for, among other things, the pain program COZY, but have not yet received any information about whether our applications will be approved or not.
“In relation to the non-dilutive capital received by the company, another SEK 227 million have been received from shareholders since its listing on the stock exchange in 2015. The conclusion is that the team at CombiGene has been very successful in both applying for and obtaining research grants, which has benefited the shareholders at large and thereby financed the company’s drug development to almost 40% over the years.”
How do you see the development in the near future?
“Of course, Spark’s termination of the collaboration agreement was a great disappointment and not something we expected in any way. Now this is a fact and nothing we can influence. What we can and will do is drive our pain program forward with full force. In parallel with this, we will continue the hunt for additional projects for in-licensing to reduce the vulnerability that arises when you have a limited project portfolio. Once we have received the epilepsy project back from Spark, we will, as I said, analyze the possibilities of finding a strong partner for CG01 again.”
