Following the late-stage failure of its anti-scarring product Juvista, Manchester, UK-based biotech Renovo is to shed over 100 jobs and may sell off its assets.
Last month, the first European Phase III trial for Juvista (human recombinant transforming growth factor beta-3) in scar revision surgery failed to meet either its primary or secondary endpoints. Renovo says the findings were "surprising in view of the results of the Phase I and II trials of Juvista, which as is typical, were conducted in more restricted, controlled populations".
Partner Shire has now confirmed it is terminated the company's licensing agreement, and so the rights to Juvista in the USA, Canada and Mexico have reverted to Renovo. What use these will be is debatable, given that the latter "regrettably concludes that the efficacy of Juvista is insufficient to demonstrate significant benefit when tested in a broad population of scar revision patients". No further development will take place.
As a result, Renovo is initiating "immediate and significant reductions in expenditure" including the 100-plus job losses, leaving about 10 staff, and a "substantial reduction in the size of the board". The company is also halting recruitment to an ongoing trial of Adaprev (mannose 6 phosphate) for improving recovery of tendon function, though a fully-recruited Phase II trial of the scar reducer Prevascar will continue.
Renovo concluded by saying that it is "actively exploring all options to maximise shareholder value of the cash and assets" including the possible sale of all its clinical and preclinical programmes. The company's share price slipped nearly 1.7% to 15 pence, having crashed some 75% after the Juvista results were first published, but analysts are pleased to see the restructuring.
Savvas Neophytou at Panmure Gordon issued a research note saying that "we applaud management's decision to conduct a strategic review so promptly" as this should help preserve the company's cash reserves which stand at £44 million. He added that "essentially, looking at the share price, the thesis has moved to one of bean counting" and "the key question seems to be one of estimating the company's wind-up costs".
The broker assumes £5-£7 million in liquidation costs and some "residual technology value" in the region of £20-£30 million. Given these estimates, Mr Neophytou has a price target of 30 pence and reiterates his 'buy' recommendation, "although we do acknowledge the shares have probably become non-investment grade for many institutions".