EIP fuses with Diffusion to extend financial freeway past delivery of dementia data on ex-Vertex drug

EIP fuses with Diffusion to extend financial freeway past delivery of dementia data on ex-Vertex drug

EIP Pharma has mapped out a financial freeway to the delivery of phase 2b on an ex-Vertex molecule. By merging with the floundering Diffusion Pharmaceuticals, the biotech is set to secure a Nasdaq listing and enough money to complete a clinical trial in dementia with Lewy bodies (DLB).

Boston-based EIP is focused on the development of neflamapimod, a p38 MAP kinase alpha enzyme inhibitor that it picked up from Vertex in 2014. Vertex developed the drug candidate as a treatment for rheumatoid arthritis, taking it as far as a midphase trial in the setting. But EIP spied another application, starting a phase 2a trial in Alzheimer’s disease in 2015.

The biotech raised $20.5 million and began a phase 2b study on the back of the Alzheimer’s data but has shifted its focus in recent years. The company wrapped up the phase 2b Alzheimer’s trial in 2019, and, while it still lists early-onset Alzheimer’s as a target indication, it is yet to run further clinical studies in the disease.

Rather, after an aborted attempt to go after Huntington’s disease, EIP has settled on DLB as its lead indication. The results from an exploratory midphase clinical trial were strong enough to persuade the U.S. National Institute on Aging to chip in $21 million toward the costs of running a phase 2b. But EIP remained on the lookout for other ways to firm up its financial footing.

Enter Diffusion. The publicly traded biotech began looking for strategic alternatives, including a sale, in October after initially focusing on finding a buyer or partner for its trans sodium crocetinate candidate. Diffusion studied the bipolar synthetic carotenoid in indications including glioblastoma multiforme in the belief it could improve outcomes by enhancing the body’s ability to deliver oxygen.

Plans were afoot to start a phase 2 clinical trial of the candidate but were paused in connection with the EIP deal. If the EIP-Diffusion merger is completed, the combined company, which will change its name to CervoMed, will focus on the development of neflamapimod and seek a sale or out-licensing transaction for trans sodium crocetinate.

EIP is the dominant partner in the merger, with its shareholders taking 77.25% of the combined biotech and whatever is left of the $22.5 million Diffusion had at the end of last year going into development of neflamapimod and the Boston-based business’s other oral stress kinase inhibitors. EIP expects the cash to extend its cash runway out to the end of next year, by when it should have phase 2b data in DLB.

The 160-patient study is scheduled to start in the third quarter. Shares in Diffusion rose 6.5% to above $5 in premarket trading. The biotech boosted its share price in a one-for-50 reverse stock split last year in a bid to regain compliance with Nasdaq rules and has a market cap of around $10 million.

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