enGene Holdings Inc. (NASDAQ:ENGN) is a clinical-stage biotechnology company pioneering the development of non-viral genetic medicines to improve the lives of patients. The company’s lead program, detalimogene voraplasmid (also known as detalimogene, and previously EG-70), is currently in an ongoing pivotal study for patients with high-risk, Bacillus Calmette-Guérin (BCG)-unresponsive, non-muscle invasive bladder cancer (NMIBC) with carcinoma in situ (Cis). enGene’s proprietary Dually Derivatized Oligochitosan (DDX) gene delivery platform enables localized delivery of multiple gene cargos directly to mucosal tissues and other organs, positioning the company to address a wide range of diseases with high unmet needs.
Business Overview and Company History
enGene was founded in 1999 and is headquartered in Montreal, Quebec, Canada. The company’s initial focus was on developing non-viral genetic medicines based on its novel DDX gene delivery platform. In 2013, enGene entered into a subscription agreement with multiple investors to sell Class A redeemable convertible preferred shares, providing initial funding to establish its headquarters and complete experiments supporting a patent application for its DDX platform. Over the following years, the company continued to raise funds through the issuance of additional classes of redeemable convertible preferred shares, convertible notes, and warrants.
In 2021, enGene entered into a subscription agreement to sell Series 3 Class C redeemable convertible preferred shares, which included the issuance of warrants to purchase additional Class C shares. The company also secured a loan and security agreement with Hercules Capital, Inc. for a term loan facility of up to $20 million, providing additional capital to support its research and development activities.
In October 2023, enGene Holdings Inc. was formed through a reverse recapitalization transaction with Forbion European Acquisition Corporation (FEAC), a special purpose acquisition company (SPAC). This transaction resulted in enGene becoming a publicly traded company, with its shares and warrants listed on the Nasdaq Global Market under the symbols ENGN and ENGNW, respectively. The reverse recapitalization provided enGene with approximately $53 million in net proceeds, addressing previous challenges in securing sufficient funding to support its operations and development activities.
Since the reverse recapitalization, enGene has continued to execute on its strategy of mainstreaming genetic medicines. The company’s lead program, detalimogene, is currently being evaluated in an ongoing pivotal Phase 2 LEGEND study for patients with high-risk, BCG-unresponsive NMIBC with Cis. In September 2024, enGene announced preliminary data from the pivotal cohort of the LEGEND study, which demonstrated a 71% complete response rate at any time and a favorable tolerability profile.
Financials and Liquidity
As of July 31, 2024, enGene reported $257.7 million in cash and cash equivalents, which the company expects will be sufficient to fund its operating expenses and debt obligations into 2027. For the nine months ended July 31, 2024, the company reported a net loss of $39.8 million, with research and development expenses of $27.0 million and general and administrative expenses of $17.8 million.
enGene’s balance sheet is relatively strong, with a current ratio of 19.5 and a quick ratio of 19.5 as of July 31, 2024. The company’s long-term debt, which consists of a $22.5 million term loan facility with Hercules Capital, represents a debt-to-equity ratio of only 0.10. enGene’s strong liquidity position and conservative leverage provide the financial flexibility needed to advance its lead program and expand its pipeline.
For the three months ended July 31, 2024, enGene reported research and development expenses of $11.55 million, an increase of $7.65 million compared to the same period in 2023. This increase was primarily driven by a $7.07 million rise in direct expenses for the detalimogene program, as the company ramped up its clinical and manufacturing activities to advance the LEGEND study and prepare for a Biologics License Application submission. Additionally, personnel-related costs in the research and development function increased by $0.78 million as the company hired key personnel to support clinical operations, quality, medical affairs, and manufacturing functions for the detalimogene program.
General and administrative expenses for the three months ended July 31, 2024 were $5.21 million, an increase of $2.86 million compared to the same period in 2023. This increase was mainly attributable to a $2.69 million rise in personnel-related expenses, driven by the hiring of key general and administrative personnel to support the company’s operations as a public company, as well as former CEO transition fees and an increase in stock-based compensation expense. The company also saw a $1.01 million increase in other expenses, primarily due to higher directors and officers insurance costs associated with operating as a public company.
For the fiscal year 2023, enGene reported no revenue, a net loss of $99.92 million, operating cash flow of -$24.74 million, and free cash flow of -$25.06 million. In the most recent quarter (Q3 2024), the company again reported no revenue, with a net loss of $14.15 million, operating cash flow of -$7.18 million, and free cash flow of -$7.18 million. Year-over-year, the company’s net loss, operating cash flow, and free cash flow all increased significantly as enGene continues to invest heavily in the development of its lead product candidate, detalimogene voraplasmid.
enGene operates primarily in the United States and Canada as a small-cap company focused on developing its lead product candidate. The company also has an available credit line of up to $50 million under its Amended Loan Agreement with Hercules Capital, subject to certain conditions, further strengthening its financial position.
Detalimogene: Addressing the Unmet Need in BCG-Unresponsive NMIBC
enGene’s lead investigational product, detalimogene, is a non-viral gene therapy designed to treat patients with high-risk, BCG-unresponsive NMIBC with Cis. This patient population faces a significant unmet need, as current standard-of-care treatments often have limited efficacy and/or tolerability issues.
The ongoing LEGEND pivotal study is evaluating detalimogene in this patient population. In September 2024, enGene reported preliminary data from the pivotal cohort, which demonstrated a 71% complete response rate at any time and a favorable tolerability profile, with no drug-related discontinuations. These results are consistent with the previously reported Phase 1 data and suggest that detalimogene has the potential to become a foundational therapy for patients with high-risk, BCG-unresponsive NMIBC with Cis.
In addition to the pivotal cohort, enGene is also planning to expand the LEGEND study to include a third cohort targeting high-risk, BCG-unresponsive, papillary-only NMIBC patients, as well as a modification to the second cohort to separately analyze responses between BCG-naïve and BCG-exposed patients. These planned expansions demonstrate enGene’s commitment to developing detalimogene as a comprehensive solution for patients across the NMIBC disease spectrum.
On June 13, 2024, enGene announced plans to explore additional applications of detalimogene within the bladder by expanding the Phase 2 LEGEND study to include the third cohort targeting high-risk BCG-unresponsive papillary-only NMIBC patients, as well as plans to modify the second cohort to separately analyze responses between BCG-naïve patients and BCG-exposed patients. This expansion highlights the company’s strategy to maximize the potential of detalimogene across various NMIBC patient populations.
Risks and Challenges
While enGene’s progress with detalimogene is promising, the company faces several risks and challenges common to clinical-stage biotechnology companies. These include the inherent uncertainties of the drug development process, the potential for regulatory setbacks, competition from other therapies, and the need to successfully scale its manufacturing and commercialization capabilities.
Additionally, as a relatively young public company, enGene must continue to build out its organizational infrastructure and internal controls to support its growth as a publicly traded entity. The company has already identified and begun to remediate several material weaknesses in its internal control over financial reporting, but successfully addressing these issues will be an ongoing focus.
Management Changes
In July 2024, enGene appointed Ronald H.W. Cooper as its new CEO, replacing Jason Hanson, who transitioned to a strategic advisor role. This leadership change comes at a crucial time as the company advances its lead program and prepares for potential commercialization. There have been no reported scandals or short seller reports associated with the company.
Outlook and Conclusion
enGene’s vision to mainstream genetic medicines through the delivery of therapeutics to mucosal tissues and other organs is an ambitious and compelling one. The company’s lead program, detalimogene, has demonstrated promising clinical activity and a favorable tolerability profile in patients with high-risk, BCG-unresponsive NMIBC with Cis, a population with significant unmet medical needs.
The $200 million private placement financing completed in February 2024 has strengthened enGene’s balance sheet and extended its cash runway into 2027, providing the resources needed to advance detalimogene through regulatory approval and potentially expand its pipeline. With a strong cash position, a promising lead candidate, and a differentiated delivery platform, enGene is well-positioned to continue executing on its strategy and creating value for shareholders.
As the company progresses detalimogene through the clinic and works to build out its organizational capabilities, investors will want to closely monitor enGene’s ability to achieve key milestones, address its internal control weaknesses, and navigate the inherent risks of drug development. The recent management change, with the appointment of Ronald H.W. Cooper as CEO, adds a new dynamic to the company’s leadership and may bring fresh perspectives to its strategic direction.
Overall, enGene’s focus on mainstreaming genetic medicines in areas of high unmet need makes it an intriguing story worth following in the biotechnology space. The company’s strong financial position, innovative technology platform, and advancing clinical program provide a solid foundation for potential growth and value creation in the coming years.
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