Evelo Biosciences, Inc. is a clinical-stage biotechnology company that is pioneering a new class of oral medicines designed to act on the small intestinal axis (SINTAX) to produce systemic therapeutic effects. The company's innovative approach aims to harness the power of the gut-body network to develop therapies for a wide range of inflammatory diseases.
Company Background
Founded in 2014, Evelo has devoted substantially all of its resources to research and development efforts, building its intellectual property portfolio, and raising capital through equity offerings and debt financing. The company has not generated any product or license revenue related to its primary business purpose to date. In 2017, Evelo entered into an exclusive license agreement with the Mayo Clinic, which provided the company with rights to certain intellectual property and microbial strains. This agreement required Evelo to meet various development and commercialization milestones, as well as make milestone and royalty payments.
Product Pipeline and Development
Evelo has made significant strides in advancing its SINTAX platform and building a diversified pipeline of product candidates. The company's lead candidate, EDP1815, has been evaluated in over 800 patients to date and has displayed a favorable safety and tolerability profile. EDP2939, Evelo's second-generation product candidate, represents a potential pipeline-in-a-product, with preclinical data suggesting biologic and JAK inhibitor-like activity in Th1 and Th17 inflammation models.
Evelo's strategic focus has been on developing therapies that can overcome the limitations of current anti-inflammatory drugs, which often rely on systemic immunosuppression. The company's SINTAX-based approach is designed to modulate the immune system without compromising overall immune function, potentially offering a safer and more effective treatment option for patients.
In September 2021, Evelo announced positive data from a Phase 2 trial of EDP1815 in psoriasis. The trial evaluated three doses of EDP1815 in patients with mild and moderate psoriasis. In Part A of the trial, 25% to 32% of patients across the three EDP1815 treated cohorts achieved a 50% or greater reduction in Psoriasis Area and Severity Index (PASI) scores at week 16, compared to 12% on placebo. The pooled PASI-50 response across all three EDP1815 cohorts was 29% versus 12% for placebo, which was statistically significant.
Recent Setbacks
In 2023, Evelo faced setbacks in its clinical development efforts. The company announced that the Phase 2 trial of EDP1815 in atopic dermatitis failed to meet its primary endpoint across all cohorts, leading to the discontinuation of the program. Additionally, the top-line results from the Part B Phase 2 study of EDP2939 in moderate psoriasis did not achieve the primary endpoint, prompting Evelo to cease further development of this candidate.
These clinical trial failures have had a significant impact on the company's operations. In response, Evelo implemented cost-reduction measures, including a workforce reduction of approximately 45% in early 2023, in order to preserve cash and prioritize investment in its core research and development programs.
Financials and Liquidity
As of September 30, 2023, Evelo had cash and cash equivalents of $17.3 million, which, based on the company's current operating plan, is not expected to be sufficient to fund operations and capital expenditures for at least the next twelve months. The company has identified conditions and events that raise substantial doubt about its ability to continue as a going concern.
For the nine months ended September 30, 2023, Evelo incurred a net loss of $58.81 million, compared to a net loss of $90.99 million for the same period in 2022. Research and development expenses were $37.40 million for the nine-month period in 2023, down from $62.47 million in the prior year period, primarily due to decreases in spending on inflammation programs, personnel costs, and platform expenses.
In the most recent quarter, Evelo reported no revenue and a net loss of $12.36 million. The company's current ratio and quick ratio both stand at 4.16, indicating a relatively strong short-term liquidity position. However, the lack of revenue and ongoing losses underscore the financial challenges facing the company.
To address its liquidity challenges, Evelo entered into a loan agreement with Horizon Technology Finance Corporation in December 2022, securing a term loan facility of up to $45 million. However, the company's existing cash resources and the financing provided by the Horizon loan are not expected to be sufficient to meet its future debt repayment obligations. Evelo is currently exploring strategic alternatives, including the potential to partner or sell its SINTAX platform and remaining product candidates, in an effort to secure additional funding and strengthen its financial position.
Future Outlook and Challenges
Evelo's struggles in its clinical development efforts and the subsequent impact on its financial condition underscore the inherent risks associated with early-stage biotechnology companies. The company's ability to successfully navigate this challenging period and identify a viable path forward will be crucial in determining its long-term viability and potential to deliver on the promise of its SINTAX platform.
Despite the recent setbacks, Evelo's innovative approach to targeting the gut-body network remains intriguing, and the potential of its SINTAX medicines to address a broad range of inflammatory diseases continues to be of interest to the industry. However, the company's immediate focus will be on securing the necessary funding and strategic partnerships to sustain its operations and, potentially, resume the development of its product candidates.
In light of the recent clinical trial failures, Evelo has suspended development of its product candidates and initiated a process to explore strategic alternatives, including potentially partnering EDP1815 and/or the SINTAX platform. The outcome of this strategic review will inform the company's future financial and clinical development plans.
Investors and industry observers will closely monitor Evelo's strategic review process and any updates on the company's efforts to secure additional financing or strategic alternatives. The outcome of these efforts will be critical in determining the future direction of Evelo Biosciences and its SINTAX platform. Without additional financing or a favorable strategic transaction, Evelo may be forced to further reduce costs, seek bankruptcy protection, or cease operations altogether.