Dive Brief:

• Coherus BioSciences, a California-based drugmaker, plans to buy the biotechnology company Surface Oncology in an all-stock acquisition that would give it access to two experimental cancer medicines in human testing.
• The companies expect their deal, announced Friday, to have a total value in the range of $60 million to $65 million, and to close sometime between July and September. The boards of both Coherus and Surface have unanimously approved the transition.
• Sierra’s work revolves around harnessing the body’s immune system to fight cancer. The company’s most advanced drug targets IL-27, an immune system-regulating protein that some researchers believe can play a role in cancer development. The drug is currently being evaluated in early- and mid-stage trials as a treatment for solid tumors affecting the lungs and liver.

Dive Insight:

Though most known for its biosimilars business, Coherus has been trying to establish itself as a player in immuno-oncology as well.

There, the company has two of its own experimental drugs in clinical testing. One targets the “PD-1” protein that gave rise to blockbuster medicines like Merck & Co.’s Keytruda. It’s currently under review at the Food and Drug Administration, which is weighing whether to approve it as a treatment for a cancer affecting areas around the nose and throat.

Coherus’ other drug goes after “TIGIT,” a protein that has, in recent years, attracted much attention from immunotherapy developers.

By purchasing Surface, Coherus doubles its number of clinical-stage immuno-oncology programs. In addition to that lead candidate, Surface has a different drug designed to deplete a type of white blood cell which suppresses the immune system. The drug, known as SRF114, is being evaluated in an early-stage study of patients with advanced solid tumors, including those with head and neck cancer.

“This transaction is well-timed, as it coincides with the accelerating growth of our biosimilar revenues,” said Denny Lanfear, Coherus’ CEO, in a statement. Lanfear also noted how the deal expands his company’s research into “agents targeting immune-suppressive mechanisms of the tumor microenvironment.”

Deal terms hold that Coherus will issue shares of its common stock at a price just over $5.28 apiece to acquire all outstanding shares of Surface. The acquisition’s total value takes into account that issuance, representing $40 million, plus the $20 million to $25 million in net cash Surface is expected to have at the transaction’s close.

Founded in 2014, Surface quickly came on the radar of both life sciences investors and large pharmaceutical partners. By early 2015, it had raised $35 million through a Series A financing round that was led by Atlas Venture — which had seeded the company — and saw participation from Fidelity Biosciences, the venture arms of Eli Lilly and Amgen, and the Novartis Institutes for Biomedical Research.

Surface inked a research collaboration with Novartis the following year, setting itself up for $170 million in cash upfront, equity, and near‐term milestone payments. The company then went public in 2018, raising an additional $108 million.

But shortly after its public market debut, Surface hit a setback. One of its most closely watched programs at the time, a drug directed at a cancer-linked protein called CD47, delivered disappointing results in early-stage testing.

The company’s share price subsequently slid. And though it popped back up in late 2020, around the time Surface got another big pharma partner in GSK, it has steadily declined since then. By market’s close Thursday, Surface shares were valued at about 75 cents apiece.

Along with the announced transaction, Surface said it will lay off around half of its employees. The company had previously disclosed in November plans to lay off a fifth of its workers, and at the end of March, said in a filing it had a total of 60 employees.

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• Source: https://www.biopharmadive.com/news/coherus-surface-acquisition-immuno-oncology-cancer/653256/