Mystery biotech Emmaus grabs groundbreaking FDA panel backing for sickle cell drug — after quietly scrapping $225M deal

Yutaka Niihara

A little-known biotech out of Torrance, CA is one big step closer to winning the first new drug approval for sickle cell disease in close to 20 years. And it has achieved precious little attention for its years-long clinical odyssey with the drug — or the $225 million deal it just quietly scuttled days ago.

Emmaus Life Sciences won an FDA panel vote favoring an approval by 10-3, setting it on a course for an odds-on approval by the PDUFA date of July 7. The breakthrough win comes just days after Emmaus filed documents with the SEC saying that it had called off a move to sell a majority interest in the company to Generex for $10 million in cash plus $215 million in stock.

Generex $GNBT has a market cap of sightly more than $5 million.

Emmaus’ drug is L-glutamine, now dubbed Endari, which CEO and founder Yutaka Niihara has been working on for years. Healio reports the drug won orphan status in 2001, with fast track status coming 12 years ago. The Phase III data were reported in 2014. And Healio’s report on the vote reflected some deep seated reservations among the panel members tasked with the review.

“My ‘yes,’ like many of the [votes], was difficult,” noted Brian I. Rini, acting chairperson of ODAC. “This could have gone either way. This is clearly a bad disease — worse than cancer in many ways, mostly from a stigma standpoint — and to complete two randomized studies is a major accomplishment. Our job, however, is to recommend approval of drugs not based on desperate need, but based on good data. The data were all there and I think it might be helpful in how we apply this drug clinically if it is FDA approved.”

One of the panel’s primary concerns, according to BioCentury, was the high rate of dropouts — 36% compared to 24% for the placebo group. FDA reviewers had trouble with missing data from the study and questioned the efficacy, noting that a reduction of one sickle cell crisis over 48 weeks might not provide a clear clinical benefit for patients.

Emmaus reported top-line data back in 2014, saying that the drug also reduced hospitalizations by 33%.

Interestingly, Scott Gottlieb’s role as a partner at T.R. Winston, a boutique investment bank, led him to Emmaus Life Sciences, which he included on a long list of companies he was severing connections with after taking over as FDA commissioner. Gottlieb committed to recuse himself from any agency decisions on Emmaus, now up for a formal approval.

Niihara was supposed to become executive chairman at Generex $GNBT, an OTC company which executed a 1-for-1000 stock split two months ago to resolve its penny stock status. Emmaus is an unlisted public company, and in an 8-K on Friday the company reported that it was terminating the letter of intent on the Generex acquisition:

The termination of the LOI was based on Generex’s failure to file an amendment to its restated certificate of incorporation effecting an increase in its authorized capital by May 1, 2017 and the parties’ inability to agree on a resolution of certain key financial accounting issues regarding the financial consolidation of Emmaus and Generex resulting from the transactions contemplated in the LOI, which prevented further negotiation and agreement on key material terms of the formal purchase agreement provided for in the LOI.

Generex says it couldn’t complete the deal as planned. From their filing:

The LOI was predicated upon a timeline for the implementation of Generex’s reorganization plan, which included, among other things, the acquisition of the Emmaus capital stock, the acquisition of the capital stock of Hema Diagnostic Systems, Inc., a reverse stock split, an increase in the authorized number of shares of Generex common stock (to be approved at a stockholders’ meeting), and raising capital….(T)he Company subsequently encountered unanticipated regulatory and operational issues that delayed the implementation of the reorganization plan…

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