Metacrine, Inc. (NASDAQ:MTCR) is a clinical-stage biopharmaceutical company focused on developing differentiated therapies for patients with gastrointestinal (GI) diseases. The company's lead product candidate, MET642, targets the farnesoid X receptor (FXR), which plays a key role in modulating GI and liver diseases. While Metacrine has faced some setbacks in its development efforts, the potential of MET642 in treating inflammatory bowel disease (IBD), particularly ulcerative colitis (UC), presents an intriguing opportunity.

Financials

Metacrine's financial performance has been challenging in recent years. For the full year 2022, the company reported an annual net loss of $61.2 million, with no revenue generated. This was driven by $47.2 million in annual operating cash outflows and $47.2 million in annual free cash outflows. The company's liquidity position remains strained, with $52.8 million in cash and cash equivalents as of September 30, 2022.

On a quarterly basis, Metacrine reported a net loss of $5.5 million for the third quarter of 2022, with $1.3 million in research and development expenses and $3.8 million in general and administrative expenses. The company's cash burn rate remains high, with $24.4 million in net cash used in operating activities during the first nine months of 2022.

Business Overview

Metacrine was founded in 2014 and is headquartered in San Diego, California. The company's primary focus has been the development of FXR agonists, with MET642 as its lead product candidate. FXR is a nuclear receptor that plays a crucial role in regulating bile acid, lipid, and glucose metabolism, as well as inflammation and fibrosis in the liver and GI tract.

In October 2021, Metacrine discontinued the development of its FXR agonist, MET409, for the treatment of non-alcoholic steatohepatitis (NASH) and shifted its focus to developing MET642 for the treatment of UC, one of the two primary types of IBD. This strategic decision was driven by the company's assessment of the competitive landscape and the significant resources required to pursue further development in NASH.

MET642 for the Treatment of Ulcerative Colitis

Metacrine believes that FXR agonists, such as MET642, have the potential to be an attractive treatment option for patients with UC. FXR plays a key role in maintaining healthy intestinal function by regulating the epithelial barrier, reducing bacterial translocation, and modulating the innate immune response. In preclinical studies, Metacrine has observed statistically significant improvements in colon histology with MET642 at levels similar to a mouse antibody targeting the IL-12/23 pathway, which is the target of current approved biologic therapies for IBD.

Metacrine had planned to initiate a Phase 2a proof-of-concept clinical trial of MET642 in UC in 2022. However, the company has delayed the commencement of this trial until the completion of its review of strategic alternatives, including a proposed merger with Equillium, Inc. announced in September 2022. The ongoing conflict between Russia and Ukraine may also impact the timeline and costs of this trial, as some of the original trial sites were located in Russia and Ukraine.

Risks and Challenges

Metacrine faces several risks and challenges in its pursuit of developing MET642 for the treatment of UC. As an early-stage biopharmaceutical company, Metacrine has limited experience conducting clinical trials in humans and has not yet conducted any trials in UC. The company's future success is highly dependent on the successful development and commercialization of MET642, which is its only product candidate.

Additionally, the development and commercialization of drug products is subject to extensive regulation, and Metacrine may not obtain the necessary regulatory approvals for MET642. The company also faces the risk of delays or difficulties in enrolling patients in its clinical trials, as well as the potential for adverse side effects associated with MET642 or any future product candidate.

Metacrine's financial position remains a significant concern, with limited cash resources and a high cash burn rate. The company will need to obtain substantial additional funding to complete the development and potential commercialization of MET642, which may be challenging given the current market conditions.

Competitive Landscape

The IBD market, including UC, is highly competitive, with several approved therapies and a robust pipeline of product candidates in development. Metacrine's MET642 will face competition from established treatments, such as infliximab (Remicade), adalimumab (Humira), vedolizumab (Entyvio), ustekinumab (Stelara), and tofacitinib (Xeljanz), as well as from other companies developing FXR agonists and novel therapies for IBD.

Metacrine's ability to differentiate MET642 and demonstrate its potential advantages over existing and emerging treatments will be crucial to its success in the market. The company's strategy of targeting the FXR pathway, which has not yet been widely explored in IBD, may provide a unique opportunity, but the company will need to overcome the challenges of being an early-stage player in a competitive landscape.

Proposed Merger with Equillium

In September 2022, Metacrine announced that it had entered into an agreement to merge with Equillium, Inc., a biopharmaceutical company focused on developing therapies for severe autoimmune and inflammatory diseases. The proposed merger is subject to various closing conditions, including approval by Metacrine and Equillium shareholders, as well as regulatory approvals.

If the merger is completed, Metacrine's stockholders would receive consideration consisting of a mix of Equillium common stock and cash. The transaction is intended to provide Metacrine with additional resources and expertise to advance the development of MET642 and potentially other product candidates. However, there is no guarantee that the merger will be successfully completed, and Metacrine may need to pursue alternative strategic options if the transaction does not materialize.

Outlook

Metacrine's future remains uncertain, as the company navigates the challenges of developing MET642 for the treatment of UC and explores strategic alternatives, including the proposed merger with Equillium. The potential of MET642 in addressing unmet needs in IBD is intriguing, but the company will need to overcome significant hurdles, including regulatory approval, patient enrollment, and competition, to realize the full value of this asset.

Metacrine's financial position is a significant concern, with limited cash resources and a high cash burn rate. The company will need to secure additional funding, either through the proposed merger or other means, to continue the development of MET642 and sustain its operations.

Conclusion

Overall, Metacrine represents a promising, yet high-risk, opportunity in the biotech sector. Investors should closely monitor the company's progress, the outcome of the proposed merger, and the development of MET642 in the treatment of UC. While the path forward is uncertain, Metacrine's focus on innovative approaches to GI diseases and the potential of MET642 warrant continued attention from those willing to take on the risks associated with an early-stage biopharmaceutical company.