Sienna Biopharmaceuticals Inc., a biotech company dedicated to developing skin creams for psoriasis, filed for Chapter 11 reorganization earlier this month. Shares of Sienna plummeted 73 percent on Sept. 17, the day the company made its Chapter 11 announcement. On Sept. 25, shares closed on the Nasdaq at 12 cents. Current numbers are a far cry from when Dr. Frederick Beddingfield III, chief executive of Sienna, rang the bell on the Nasdaq MarketSite in Times Square. That was July 27, 2017 – and shares of Sienna closed up $4.25, or more than 28 percent, to $19.25 that day. Now, according to a statement from the Westlake Village company, it is looking at two pathways forward – either selling the company or entering a partnership. The decision is not entirely out of the blue, with the company retaining New York investment bank Cowen and Co. in February and releasing a statement in August that it planned to pursue “financial and strategic alternatives.” The company’s legal counsel, Los Angeles-based Latham and Watkins, and Cowen will look to a sale or partnership pathway, as well as any other opportunity that presents itself, Sienna said. “We believe this decision is in the best interests of Sienna and its stakeholders,” Beddingfield said in a statement. “The protections afforded by Chapter 11 provide for an orderly restructuring process as well as additional time to pursue financial and strategic alternatives. Through this process, we expect to be able to maintain ongoing business activities while we continue to focus our resources on locating a purchaser or strategic partner to maximize the value of the company.” Cash burn The company, which was originally founded in Delaware as Sienna Labs in July 2010, employs 18 individuals, all of whom are located at Sienna’s 7,000-square-foot headquarters at 30699 Russell Ranch Road. Sienna told the Business Journal in an email that the company prefers to keep its comments to those from the press release, until there is more information about the path it will take to restructure itself. Bankruptcy court filings point to cash burn and lack of available revenue while going through clinical trials as the leading reason for filing Chapter 11. The company reported an accumulated deficit of $184 million as of June 30, with a net loss of $24.6 million within a six-month period ended that same date. Lackluster results for pipeline drug SNA-125 is another contributing factor to Sienna’s situation. The drug, a topical cream designed to treat atopic dermatitis, psoriasis and associated pruritus, showed no visible reduction in inflamed skin during a Phase 2 study in August 2018. “We would have liked to have seen more robust impact in this early-stage model, but treatment with SNA-125 may take longer than 10 treatments to reveal its full effect,” Beddingfield explained in a statement from August. “In parallel with this study, we have developed a more optimal cream formulation to treat inflammatory skin disorders that is undergoing nonclinical testing, and we remain excited about our Phase 2 studies beginning in the second half of 2019.” Brent Reinke, founder and chairman of Conejo Valley’s BioScience Alliance and an attorney at Musick Peeler and Garrett LLP in Thousand Oaks, noted that when startup pharma companies run into trouble with their science, it can create a downward spiral. “Of course, when that happens, the market reacts negatively to the news,” he told the Business Journal. “For a publicly traded company, it causes the stock to take a hit and it’s more difficult to do more full-on financing or raise capital.” Sienna reportedly had $57.2 million in cash and cash equivalents at the end of the first quarter this year. Promising research The bankruptcy court has concluded that Sienna did not have capital to continue operations, let alone fund planned Phase 3 clinical trials for its most promising topical psoriasis drug, SNA-120. The company acquired the topical drug, as well as SNA-125, when it partnered with U.K.-based Crabilis in December 2016. SNA-120 in May showed promise during a Phase 2 study involving 22 patients at Rockefeller University in New York. “The clear and substantial impact by Sienna’s SNA-120 on immune cells and the vast array of important psoriasis-related pathways after 12 weeks of treatment is impressive and encouraging for a topical, non-steroidal treatment,” Dr. James Krueger, senior attending physician at the Laboratory for Investigative Dermatology at the university, said in a statement at the time. Twenty-nine percent of patients in the study saw an improvement to their skin clarity; SNA-120 had been administered to more than 500 patients for 12 weeks and was “well tolerated across all trials,” the company said. After the study, Sienna’s chief medical officer, Dr. Paul Lizzul, expressed excitement to progress toward Phase 3 trials during the second half of this year. The company even met with the Food and Drug Administration in April to outline Phase 3 trials. Sienna’s third pipeline drug, SNA-001, in February showed positive results for its topical pre-treatment to standard laser hair removal. The trial involving 65 patients included men and women with white, gray, blonde, light red and light brown hair. Analysis showed that the treatment produced up to 31 percent reduction of light hair, according to information Sienna released. But ultimately, biotech is risky, especially for drug development, Reinke said. “It’s expensive and time-consuming,” he added. “The Siennas and Kytheras have shorter time periods and possibly less expense involved, being dermatology-based compared to other companies, but the reality is there are just things that can go wrong and not have favorable results fairly far into the trial stages, and that can have a really negative impact on a company.” Kythera Biopharmaceuticals started out much the same way as Sienna, but this Calabasas biotech startup had a happier ending – Dublin-based Allergan Plc acquired the company for $2.1 billion in 2015. The company went public in 2012. Many of Sienna’s executive team actually came from Kythera, apparently hoping to strike gold twice. Both companies sought to develop non-prescription drugs to avoid stringent regulatory requirements – Sienna with its topical psoriasis creams and Kythera with Kybella, an injectable drug designed to melt fat under the chin. For Sienna’s investors, the risk is the same as what those at the company face. Oftentimes in the biotech industry investors take a chance on the people more so than the drug, Reinke said. For Reinke, it’s especially disheartening to see a company file Chapter 11 when they’re this far along with clinical trials, coupled with the fact that Sienna went public in August 2017. “It’s disappointing to hear, but I think people, as we get more and more life science and biotech companies in the area, accept the fact that it’s a high-risk, high-reward industry,” added Reinke. “You don’t take this step unless things are pretty serious, going in a direction you don’t want to go. This really is an effort to give Sienna a breather, to try to find someone to partner with or sell the company to provide value.”
