The biotechnology company, Genocea Biosciences Inc. (GNCA) has tried to develop a working drug for many years. Its efforts included drug development for herpes, pneumonia, and the most recent cancer. The company had lately been working on its proprietary ATLASTM platform to develop cancer therapies using T cells. It even entered into an R&D collaboration with Janssen (a pharmaceutical company of Johnson & Johnson) regarding cancer therapies under the ATLAS platform. GNCA was studying its candidate GEN-011 and GEN-009 in Phase 1/2a clinical trials.
However, with no meaningful results from any of its trial progress and a dwindling cash position, the company commenced restructuring last month. It even laid off 65% of its staff and was evaluating its R&D programs. The biotech firm was exploring its strategic alternatives to improve shareholder value and save it from its downfall. But the latest news of a complete wind-down and delisting from Nasdaq concluded that the company failed to achieve any results from the review process.
The Latest News & Price Action
The latest news caused the already plummeting shares to collapse in the regular session. GNCA stock plunged by an extreme 72.69% to trade at just $0.0609 at the close of regular trading. This brings the one-year losses of the stock to over 97%, meaning it has lost nearly all of its value with a year-to-date decline of nearly 95%. But surprisingly, the following after-hours session on May 24 brought a weird turn of events for the stock. The stock rebounded to add 19.87% in the late trading session despite the company’s gravely depressing news. Consequently, GNCA soared 45.64% to $0.0887 in pre-market trading on May 25.
It seems investors are making a run for some final profits from the stock before the company closes down for good and delists from the exchange. This is the only plausible explanation for the after-hours rebound of the stock as there is nothing left in the company to be buying the stock.
Precursors to the Downfall of GNCA
Dwindling Cash Position
The biotechnology company had devoted most of its efforts to product research and development but had not generated any product revenue to date. When it posted 2021 year-end results back in March, the declining cash balance of GNCA raised many concerns. Its cash balance has been reducing at a very fast pace from $79.8 million to $37.1 million and now to just $20.1 million as of March 31, 2022. As per the Q1 report, the company expected its cash balance to lead it to just the next quarter, Q3 2022.
Moreover, the increasing expense and loss also raised doubts about the company continuing as a going concern. In the first quarter of 2022, the loss from operations was $15.8 million while it used $15.2 million of cash in operating activities. At the end of March, GNCA had a deficit of $423.8 million, and meeting future obligations seemed quite impossible with significant operating losses seen for the foreseeable future.
In an effort to raise funds, the company had also an agreement with Cowen for an at-the-market equity offering. In the first quarter of 2021, the company was able to raise just $0.4 million under the ATM.
Unfruitful R&D Programs
The company had long been excited about its GEN-011 trial in pre-treated solid tumor patients. GNCA presented early data from the trial at the American Association for Cancer Research (AACR) annual meeting. While investors and experts were highly disappointed in the data, the company still called it “encouraging”. According to the data, 4 out of 5 patients demonstrated stable disease at Day 57. Three out of five showed clear biologic changes after infusion while all patients had progressive disease at Day 113. Only one patient marked a 10% reduction in tumor diameters with the resolution of tumor-related cough.
Following the unimpressive data announcement, GNCA shares went down by a hefty 51.5% in regular trading alone.
Last Nail in the Coffin
The last nail in GNCA’s coffin was its non-compliance with Nasdaq listing standards due to its share price. The company’s shares have been closing below the required $1.0 per share for more than consecutive 30 days. This led to the exchange notifying the company as it was facing a threat of delisting its shares.
The Restructuring & Review Process
Critically short on cash, the company announced the initiation of a strategic review and restructuring process. It even onboarded professional advisors and an investment bank to help it find a solution to its woes. Options on the table included the partial or complete sale of the company and a merger or reverse merger.
Furthermore, the restructuring plan had it reduce its workforce by a substantial 65% while it evaluated its clinical and research programs. Following the layoffs, the company was left with just 26 employees.
Hence, the Wind Down & Delisting
Unable to find any means to save the company, GNCA said on Tuesday that it has decided to completely wind down its operations. The company is even letting go of the remaining staff, just leaving the essential few for completing the wind-down process.
Yesterday, the company delivered a formal notice to The Nasdaq Stock Market Inc. regarding its voluntary delisting from the exchange. The company plans to file a Form 25 with the SEC by June 2 in order to effect the voluntary delisting while it already was facing the threat.
Conclusion
GNCA tried its best to deliver a working drug and start generating revenue. But its dwindling cash balance and increasing expenses forced it to opt for a strategic review and restructuring. Even after laying off 65% of its staff and considering a merger/sale, the company was unable to find a standing ground for itself. Thus, with the last nail in the coffin from its non-compliance with Nasdaq, it decided on a complete wind-down. GNCA is now in the process of closing its shop for good and voluntarily delisting from the exchange.
