Roquefort Therapeutics (LON:ROQ) Executive Chairman Stephen West caught up with DirectorsTalk to discuss the transformational proposed acquisition of Coiled Therapeutics, which would pivot the company into the clinical-stage biotech space.
Q1: Stephen, could you just summarise the key terms of the transaction and the relevance to Roquefort Therapeutics?
A1: Earlier this year, we set out that we were pivoting away from our pre-clinical programmes that we currently have with the ambition of acquiring clinical programmes. So, we’ve looked at lots of deals since we made that announcement and by far the best deal we’ve seen is Coiled Therapeutics, which we’ll be talking about today and just very excited about the deal.
Not only are we acquiring a clinical-stage company, it’s currently developing a new therapy in a very exciting area of oncology. Currently actively in Phase I trials in the USA so that’s very exciting and preliminary results are very good. They’ve also expressed interest in retaining our STAT-6 programme and developing that into clinical trials as well. So, all that together makes Coiled Therapeutics a very good target for us.
We’re acquiring them from a company called A2A Pharmaceuticals, which is a private US company. Coiled has essentially been spun out from A2A Pharmaceuticals and it has exclusive worldwide rights to a therapy called AO-252. AO-252, it’s a novel therapy. It’s first in class. It’s first in human. It’s a new drug alternative. It targets a protein called TACC3 for the treatment of cancer.
I won’t go into too much detail about science, but TACC is a protein which is overexpressed in multiple cancer cells but importantly, it’s not required by normal healthy cells. So, their AO-252 is targeting TACC3, it’s more precise and potentially less toxic than other drug alternatives, traditional ones like chemotherapy. If the trials are successful and they’re looking good so far, it has potential to be a first mover in a new multi-billion-dollar market, which is all very exciting.
In terms of the actual metrics around the deal. We’re acquiring them for upfront of £30 million, that’s payable in Roquefort Therapeutics shares. What’s very important for us is alongside the deal, we’ve got A2A Pharma, which is the ultimate holding company and its investors, they’re committing to invest £6 million alongside the deal, which would be a majority of the funding requirement over the next two years. That was very important for us, that part shows their commitment to the deal and the company going forward.
In terms of the deal itself, we’re confident it’s going to complete, everyone’s very committed to it. Just to kind of drive that home, we do have a break fee in there of $1 million to make sure that everyone’s focused on this transaction and getting it done.
Now, due to the size of the transaction relative to our market cap, it will be an RTO. The large entity is going to be renamed Coiled Therapeutics PLC, and we will be relisting on the AIM market. So, we’re currently on the standard, but we’ll be moving over to the AIM market, we think that’s a lot better market for a company of sub £100 million with ambitions to grow the market cap.
Certainly, Coiled Therapeutics have made it clear to us their ambition is to grow the market cap of the company significantly on AIM. They’re going to do that through positive clinical results and other news flow and then the idea is to list it on NASDAQ, which is a well-trodden path for biotech companies. A couple that come to mind that have done very well at AIM are Amryt Pharma, and Silence Therapeutics have both done that successfully.
I think in summary, it is a transformational transaction for Roquefort and its shareholders, and it certainly evolves us into a material clinical stage bio company, brings a lot of very experienced and successful leadership team.
As I said, we are very excited about it.
Q2 : What sort of value track record does Coiled USA and its parent company A2A Pharmaceuticals have, and why is that relevant?
A2: A2A Pharmaceuticals, let’s start with them first. They’re a private, well-funded company, they’re in the US and they use proprietary computational systems, including generative AI to accelerate drug development. Through this, they’ve got a much more efficient process than the traditional trial and error approaches to drug discovery.
Their model is to identify and develop novel drug alternatives for life-threatening diseases like cancer and then spin them out into standalone entities like Coiled. There’s a lot of information out there on their website, which is a2apharma.com, so people can read up on that website.
Now, what’s really interesting with A2A Pharmaceuticals, they did have a spin out a few years ago. The first spin out was a company called Biomea Fusion, and they spun that out in 2018, that then IPO’d on NASDAQ in 2021, and it reached a peak market capitalisation of over a billion dollars. So, that did exceptionally well. I think through that, you can see that A2A Pharma do have a great track record, they’ve been incubating assets for years and they have a track record of realising value from that as well.
Coiled is their second asset spin out that A2A Pharma have done. Before spinning it out, they progressed the AO-252 therapy through pre-clinical programmes and through IND and then they spun it out into Coiled Therapeutics in January this year.
AO-252 is currently in Phase I trials in the USA, and the results so far are showing very good safety and significant signs of efficacy, which is obviously a major value catalyst. So, that’s very exciting by itself.
After Phase I, they’re looking at enrolling a sufficient number of patients next year to plan for Phase III registrational trials so we could be looking at moving this therapy into Phase III trials very quickly, which is another major value catalyst.
So, AO-252 in terms of market size, it could be used to treat up to 350,000 cancer patients across multiple indications in the USA and the EU. If their trials are successful, it has the potential to be a first mover in what could be a multi-billion-dollar market.
So, yes, it’s a great company, great asset, great team behind it.
Q3: Why has it been proposed to carve out Lyramid and the MK Cell programme from Roquefort?
A3: Just a bit of background. Roquefort has essentially three preclinical programmes; it has Midkine programmes, which are held by Lyramid and then we have two other programmes, STAT-6 and MK Cell, held by another subsidiary called Oncogeni.
Earlier this year, we announced that we’d signed an SPA to sell Lyramid, which holds the Midkine programmes to a company called Pleiades Pharma, that was for up to $10.8 million. They’re currently finalising investors into their company and we’re looking at hopefully completing that towards the end of October, that SPA. Now, the value of that deal alone to Roquefort shareholders is about 5p per share, more or less so we really want to try and preserve that for existing shareholders.
Coiled has not expressed any interest in those therapies because it doesn’t really align with what they’re doing so we have agreed to carve those out for the benefit of Roquefort shareholders.
I mentioned earlier that STAT-6 is staying within the company because Coiled are interested in that therapy, particularly with immunotherapy applications. I think they can see that working alongside the AO-252 therapy maybe as well so that’s why they’re interested in that one.
That leaves us the MK Cell programme. We’re fairly confident we can agree a deal around that too. We have agreed an option to carve out that asset ahead of completing this deal as well so that could be some additional value to Roquefort shareholders before we complete this deal.
Now, saying all that and talking about the carve out, we are also very, very happy with this Coiled Therapeutics deal. The value that this could create and the exposure that existing shareholders will have to that deal as well is all very exciting as well so lots of value catalysts in there for existing shareholders. We’re very happy with the response to the market since our announcement on Monday but I think you’ll see just through all these carve outs and the Coiled deal itself, there’s lots of potential upside here to be had by investors.
Q4: So, what are the next steps for shareholders to look out for?
A4: We’re very early into this process, we only announced this on Monday, but it is a well-trodden path by lots of us in the management team. We’re confident we can get this done certainly by the end of the year. We do have an exclusivity period until the end of January next year so that’s the absolute latest date we can get it done by, but we’ll be very disappointed if we can’t get it done this year.
We’re currently finalising adviser engagements and we’ve commenced drafting the SPA already so straight off the belt. We’ll shortly start drafting admission documents, investor presentations and all those documents that need to go alongside relisting on AIM.
So, as this progresses, again, very early in the process, we’ll keep the market updated on the progress, but I think it really is a great transaction for Roquefort Pharmaceuticals shareholders on one hand, but it’s also a great transaction for Coiled Therapeutics as well. It gives them a platform to grow the company, which they want to do significantly prior to listing on NASDAQ, which is one of their aims.
I think it’s a win-win for all the stakeholders in this transaction.
