Microbiome biotech Kaleido Biosciences shuts down due to cash shortages and drug setbacks

Microbiome therapies could have a big year as several biotech companies gear up for key regulatory and clinical milestones in 2022. Kaleido Biosciences will not be one of them. The company is closing its doors, a last resort decision that follows the company’s setbacks and inability to find the financial basis to support its clinical-stage programs.

In a regulatory filing on Friday, Kaleido said its board of directors voted earlier in the day to immediately cease operations at the company. The decision was made after a strategic review failed to find a way forward.

“Unfortunately, the strategy process has not resulted in the identification of any viable transaction, and given its limited resources, the company cannot continue its activities and believes that the best alternative is an orderly liquidation process”, Kaleido said in the filing.

Kaleido’s microbiome approach was different from that of other biotechnologies. Instead of therapies consisting of live microorganisms added to a patient’s microbial environment, Kaleido has developed microbiome metabolic therapies (MMTs), which he described as collections of molecules that affect the microbiome and govern the function and composition of a patient’s existing microbes. The company aimed to treat microbiome-related disorders; its pipeline covers immune-mediated diseases, respiratory disorders and immuno-oncology. The company landed a research partnership, a preclinical alliance with Janssen, a subsidiary of Johnson & Johnson, which focused on childhood allergies, among other conditions.

Kaleido was founded in 2015 by Flagship Pioneering, a venture capital firm whose other microbiome portfolio companies include Seres Therapeutics and Evelo Biosciences. Flagship start-up Senda Biosciences analyzes the interaction between humans and bacteria but does not call itself a microbiome company. After incubating within Flagship, Kaleido went stealthy in 2017 and then went public two years later, raising $75 million by selling shares at $15 each, well below the 20-22 range. dollars per share that biotechnology had predicted. Flagship is Kaleido’s largest shareholder, holding 45.9% of the company’s shares as of the end of March, according to regulatory filings.

Kaleido’s stock price closed at 26 cents on Friday, down more than 81% from Thursday’s closing price. In its three years as a public company, Kaleido’s shares have mostly fallen from their IPO price, with the exception of early last year. At that time, few treatment options were available for Covid-19 and Kaleido shares rose after the company reported encouraging interim clinical data for an MMT it was testing as a potential treatment. The Kaleido drug, KB109, was originally developed to prevent infections caused by multidrug-resistant bacteria. The company had said it could provide a non-antibiotic approach that selectively enhances the growth of beneficial gut bacteria at the expense of pathogens. For Covid, the company hypothesized that its experimental therapy could help limit the cascade of inflammatory responses caused by the viral infection.

The encouraging early data for KB109 were the latest positive signs for this therapeutic candidate and Kaleido. Last August, the FDA sent the company a warning letter raising concerns about a study evaluating microbiome therapy as a medical food, not a drug. The FDA said Kaleido was testing KB109 in Covid-19 without meeting clinical trial requirements for a drug.

Red flags waved Kaleido long before the FDA’s warning letter. For more than a year, the biotech’s financial statements have revealed dwindling cash flow and doubts about the company’s ability to continue operating. In its annual report filed in early April, Kaleido said it only had $38.5 million in cash at the end of 2021, which isn’t enough to sustain the company for another year. The company added that it plans to raise more capital through equity or debt financing, or through collaborations or licensing agreements. None of these options materialized.

Kaleido said in the regulatory filing that it fired its entire workforce on Friday. The company’s workforce stood at 76 at the end of 2021, according to the annual report; 58 of these employees worked in research and development. The company said it will file with the Securities and Exchange Commission for the delisting of its shares, which is expected to take effect around April 28.

Photo: Warchi, Getty Images

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