It’s been a rough couple of months for investors in – and employees of – Thousand Oaks-based immunotherapy company Atara Biotherapeutics Inc.
On Nov. 8, Atara announced the failure of a clinical trial for its lead drug to treat multiple sclerosis to reach its desired endpoint, prompting the company to pare back its work on the drug and refocus on its other drug programs. The company’s share price tumbled 80% on the following trading day to 24 cents and has remained in penny stock territory ever since.
By Dec. 31, Atara had laid off 73 employees in California as part of a 30% reduction in its workforce. About 48 of those workers were at its Thousand Oaks headquarters. The layoffs were part of a corporate restructuring announced just days before the results of the failed clinical trial became public.
There have been some positive developments at the company in the last two months, including the expansion of a partnership/licensing deal with a European pharmaceutical company, the sale of $15 million worth of shares to affiliates of an existing investor and some promising news on another drug in the company’s pipeline.
But so far, these developments have not significantly lifted the share price. Investors remain cautious, as the track record for biotech companies that experience a clinical failure of their leading drug candidate is spotty at best.
“Can companies overcome clinical setbacks when their lead program has a significant failure? The short answer is, maybe,” said Laura Chico, managing director of equity research on the life sciences team of downtown-based financial firm Wedbush Securities Inc.
Much depends on the strength of other drug candidates in the company’s portfolio and whether the factors behind the clinical-trial failure extend to those drug candidates, Chico added.
Clinical trial fails
In the case of Atara, the clinical trial failure came as a surprise, since data from a previous clinical trial of the drug had shown some positive results.
The drug, known by the temporary name ATA188, was developed off Atara’s T-cell platform based on the Epstein-Barr virus; the company was testing it to treat non-active progressive multiple sclerosis, a form of the disease with few other treatment options.
During a Phase 1 clinical trial to test the drug’s safety profile, the drug had shown a 33% improvement in the disability status of multiple sclerosis patients. But in the Phase 2 clinical trial – known as Embold – designed to test the drug’s effectiveness, patients given the drug only showed an improvement of about 6% in their disabilities, while patients taking a placebo showed a 16% improvement in their disabilities, meaning the placebo was more effective than the drug.
“We are surprised and deeply disappointed with the results of Embold, particularly for the MS patient community, which is in urgent need of new treatment options,” Pascal Touchon, Atara’s chief executive, said in a press release at the time. “We are further evaluating the Embold data as we continue to believe in the critical role (Epstein-Barr Virus) plays in MS pathogenesis, however we anticipate stopping the study as no treatment benefit was observed.”
Touchon said this meant significantly reducing expenses associated with the development of the drug, though he stopped short of saying the company would completely abandon it. Instead, Touchon said, the company would redouble its efforts with other drugs in its pipeline.
Atara last month had some positive news to report on one of those drugs, known as ATA 3431 to treat B-cell malignancies (B cells produce antibodies that then attack invading viruses and bacteria). The drug showed positive laboratory results in a preclinical trial, inhibiting tumor growth significantly more than the placebo.
Atara said that, given these results, it hopes to start clinical trials on this drug next year.
Expanded partnership
In another development, on Dec. 20, Atara announced it had closed a deal to expand an already existing partnership with Paris-based pharmaceutical giant Pierre Fabre to bring to market in the United States and several other countries the drug tabelecleucel, or tab-cel for short. This drug, developed by Atara, aims to treat a rare and aggressive form of hematologic cancer. The two companies had previously teamed up to commercialize tab-cel in Europe.
With the closing of the transaction, Atara will receive $27 million in cash upfront, and the company has the potential to receive up to $640 million in royalty payouts and payments contingent on achieving certain regulatory and marketing milestones.
“This deal structure meaningfully reduces our cash burn over the next two years and provides Atara and shareholders with significant value, both through short-term cash and potential milestone payments and long-term significant double-digit royalties,” Touchon said.
Simultaneous with that announcement came the layoff notice – the second round of layoffs in less than 18 months. In August of 2022, Atara announced it would lay off 20% of its staff at the time.
The company characterized this latest round of layoffs as part of its strategic plan to stretch out its “cash runway” through most of 2025.
Finally, last week, Atara announced that affiliates associated with an existing investor would buy about 27 million shares of stock at 57 cents per share in a deal valued at about $15 million. The company did not identify the investor.
Atara shares rose about 25% on this news, though that translated into a boost of only 11 cents, to 55 cents a share.
The company will need more such positive news events to push its share price above $1 and avoid delisting from the Nasdaq exchange.