IPOs, Startups

With major funding from Novartis, Surface Oncology launches a CD47 trial amid a swarm of rivals and files for $75M IPO

With a lead cancer drug now in the clinic in pursuit of a trendy target, biotech startup Surface Oncology is making a bid for IPO glory, boasting of a heavyweight ally that’s been providing much of the operating cash.

Jeff Goater, CEO

The biotech filed its S-1 late Friday, penciling in $75 million as the goal while outlining close to $200 million in backing — the lion’s share coming from its close partner Novartis.

The Cambridge, MA-based biotech attracted considerable early attention for its work jumping into the intensely competitive field of tumor microenvironment engineering work. With the CTLA-4/PD-/L1 checkpoints making impressive inroads for some segments of cancer patients, Surface is one of a myriad of startups looking to add some additional firepower with add-ons that can either take the brakes off of an immune assault or bring in additional weapons to take down cancer cells. In their case, the key focus is on countering immunosuppression.

Novartis has a PD-1 in late-stage development, but execs tend to downplay its importance, concentrating on their strategic mission to have their own checkpoint to use in combos rather than as a rival to the 5 PD-1/L1s currently on the market, with Regeneron/Sanofi and many more crowding in. Their work with Surface has brought them in on one preclinical alliance on CD73, with an IL-27 partnership hanging in the balance.

So far, according to the S-1, Novartis has fronted their work with $163.5 million in cash, including a $70 million upfront, $80 million for options and milestones and $13.5 million in stock. That includes a $45 million payment last month following “receipt of the first final audited GLP toxicology study report for SRF373.” Four VCs — Atlas, F-Prime, Lilly Ventures and NEA — split up $28 million in shares, with each adding $7 million. Atlas owns the largest chunk shares, with 23%.

Their deal with Novartis also originally included $1.17 billion in milestones, which wasn’t disclosed at the signing time, though the pharma giant also dropped two of the four potential options it had signed up for. Novartis will also help out with the IPO, purchasing $11.5 million more in stock.

Surface had burned through $74 million of its cash by the end of last year, with 56 staffers.

Initially focused on CD47, a “don’t-eat-me” target that has whipped up a lineup of contenders, Novartis ultimately passed on that program and left worldwide rights to the Phase I asset to Surface. Surface also owns the CD-39 program.

Surface has some impressive backers, including former Bristol-Myers R&D chief Elliott Sigal, who owns some stock and sits on the board.

“As we discussed last year, it is critical in the immune-oncology field to ‘skate to where the puck will be’, that is, to address the question of what is beyond PD-1 and other T-cell, checkpoint inhibitors,” Sigal noted to me back in early 2016, when Novartis signed on. But they’re by no means the only biotech with the same approach.

Competitive? The burst of investment in immuno-oncology has left Surface with a long roster of rivals. Their list includes the following examples:

For CD47 alone: Alexo Therapeutics, Arch Oncology, Aurigene, Blink Biomedical, Celgene, Forty Seven, Novimmune, OSE Immunotherapeutics, Sorrento, Synthon Holding and Trillium Therapeutics.

For the rest of the tumor microenvironment: Arcus Biosciences, AstraZeneca, Bristol-Myers Squibb, Corvus Pharmaceuticals, Innate Pharma and Palobiofarma, to name a few.

Not everything has gone completely according to plan at Surface. Founding CEO Dnetlev Biniszkiewicz resigned without explanation last fall, replaced by the CBO, Jeff Goater. Goater now is in line for a $465,000 annual salary plus options, which brought his compensation package last year to $1.4 million.

Goldman Sachs, Cowen and Evercore ISI are doing the honors on the underwriting.


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