Synlogic Becomes a Synthetic Biology Stock

One downside of having to show up at 8:00 AM every morning to kick off your cushy finance job is all the new language you need to start using. We’re talking about corporate neologisms that try and soften the blow of certain “touchy” terms. Take for example the newly coined term “RIF” which stands for Reduction In Workforce. It’s much nicer to tell your employees that “some RIFs are likely to affect our department” than it is to say “some of you are losing your jobs because AI algorithms are doing a way better job than you will be ever capable of doing“. Another great one is the PIP which stands for Performance Improvement Plan and it’s a nicer way of saying “you are negatively impacting my entire team and I can’t isolate your cretinous behavior so I need to document your every move in hopes that I can convince HR to sack you“. Then, there’s something called a “pivot”.

The pivot goes something like this. Sometimes when a business starts turning out not to be economically viable, they quickly change their entire business focus without implying they did anything wrong by just calling it a “pivot”. In the most extreme cases, companies will pivot their entire product offering while in other cases, they’ll just opt for a rebrand. When we saw that a “synthetic biology stock” called Synlogic (NASDAQ:SYBX) was engaging in a “public offering” we asked ourselves why we hadn’t come across this firm before. Was this some sort of “pivot”? Turns out that it’s actually a secondary offering, not an IPO, and it is now an entirely new company as a result of a merger which began with two well-funded startups and ended with one publicly traded stock called Synlogic.

The story starts with a startup called Mirna Therapeutics that had raised $110 million from big name investors like New Enterprise Associates, Pfizer, and Baxter to pursue an RNAi drug development platform they had been working on since 2007. In October of 2015, Mirna had an IPO which has since lost more than -80% of its value. Mirna was a company we mentioned a few years ago which was involved in something called RNAi – a gene-silencing technology that turns on and off the genes that regulate proteins in people’s cells. A whole bunch of companies have been working on RNAi, and it turns out to have something in common with the CRISPR gene editing techniques that we’ve been hearing lots about lately. Here’s an excerpt from a paper about Choosing the Right Tool for the Job: RNAi, TALEN or CRISPR:

For over a decade, RNAi has ruled the lab, offering a magic bullet to disrupt gene expression in many organisms. However, new biotechnological tools – specifically CRISPR-based technologies – have become available and are squeezing out RNAi dominance in mammalian cell studies.

Sounds like you can suppress the expression of a gene in at least a few ways; remove it or change it using CRISPR, or silence it using RNAi. Lately CRISPR stocks have been quite volatile and Editas Medicine Inc (NASDAQ:EDIT) has gained +104% since their February 2016 IPO.  Of course we don’t pay much attention to short-term price fluctuations in the volatile world of biotech stocks. What we’re really interested to know is what happened to Mirna Therapeutics whose investors must be licking their wounds from an 80% loss while their company looks to raise $50 million in additional funding. What happened is that Mirna Therapeutics went completely pear shaped according to this telling statement from their comprehensive merger announcement:

Mirna’s business has been almost entirely dependent on the success of MRX34, and Mirna has decided to discontinue further development of MRX34 and Mirna’s microRNA product pipeline and devote significant time and resources to pursing the Merger

The document goes on to talk about how it makes little sense for Mirna Therapeutics to go into liquidation but that a merger might make sense for a suitable party. Turns out that suitable party was another startup called Synlogic. So Mirna Therapeutics has essentially shut down and “pivoted” into a new business called Synlogic which we want to know more about.

Founded in 2014, Massachusetts startup Synlogic had taken in around $116 million in funding from investors that included the like of Bill and Melinda Gates along with New Enterprise Associates with the stated goal of becoming a “leader of therapeutic synthetic biology” by being able to “genetically reprogram probiotics for transformative impact on disease treatment”. Sounds kind of complicated, so here’s a diagram to simplify things a bit:

That makes sense on the surface, so what sort of applications could these “synthetic biotics” be used for? The first area of focus for the company is on “rare diseases” like hyperammonemia, a condition where toxic levels of ammonia accumulate in your body. They’re in Phase 1 trials for this application and that’s one of the furthest products along in their pipeline at the moment. Other diseases they’re looking to treat, like “maple syrup urine disease”, are even more self explanatory.

Another thing to notice in the above pipeline is their partnership with Abbvie (NYSE:ABBV), a $178 billion drug discovery company. Another partnership Synlogic announced late last year was with an exciting synthetic biology startup we’ve talked about before in an article titled Next Unicorn: Synthetic Biology Startup Ginkgo Bioworks?. According to an article by Fierece Biotech on the collaboration, Synlogic will be “accessing Ginkgo’s automated foundry for high-throughput organism screening and design will allow it to advance dozens of programs concurrently”. If you’re interested in more details surrounding their drug development programs, this investor presentation does a good job of explaining their plans.

It’s not like this $150 million company is hurting for cash right now. As of 3Q 2017, they had $96 million in cash to execute on their plan. Still, it’s extremely expensive to conduct clinical trials for new drugs so they’re probably padding their coffers as much as possible before the purse strings inevitably tighten when the longest bull market ever seen comes to an end.

When looking at this stock today, you’re looking at an entirely different company. It’s nice that the now defunct Mirna Therapeutics decided to slot in another opportunity for their investors instead of just going bankrupt and pulling a Bind Therapeutics. This also allows fresh investors on board who may see the potential in Synlogic (NASDAQ:SYBX) which will then increase the price of shares for everyone. As it turns out, New Enterprise Associates happens to be an investor in both Mirna Therapeutics and Synlogic so it’s highly likely this made the most sense for everyone involved. Now let’s see how this new company can execute on their product pipeline. Let’s hope it’s better than all the other synthetic biology stocks that have largely flopped so far.

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