Cell therapy startup Carisma merges with troubled Sesen in bid for Wall Street

Dive Brief:

• Carisma Therapeutics, a privately held cell therapy startup, plans to go public through a reverse merger with distressed drugmaker Sesen Bio.
• Under an agreement announced Wednesday, Carisma shareholders will own about 58% of the combined company, with Sesen stockholders getting the remainder. The new company will operate under Carisma’s name and develop its portfolio of cancer cell therapies, which are led by a treatment in early clinical testing for solid tumors. 
• Between a $30 million round of financing and the companies’ combined assets, Carisma will have $180 million in the bank, enough to fund its research pipeline through 2024. It will begin trading on the Nasdaq stock exchange under the symbol “CARM” once the deal closes in the next three to four months. 

Dive Insight:

Though 2022 has been a difficult year for biotechnology companies eyeing initial public offerings, a few startups have found other ways to make their Wall Street debuts.

One alternative route young biotechs can take is a reverse merger. Such deals enable a startup to leap onto a stock exchange, while giving the shareholders of its publicly traded partner a chance to bet on the future of the new company. 

Since June, at least three other privately held startups — Disc Medicine, Kineta and ARS Therapeutics — have eschewed an IPO in favor of a reverse merger. Carisma is the latest, inking a deal that would give the Philadelphia-based biotech fast access to the public markets while allowing Sesen a chance to capitalize on the value of its public listing.

“Given the current challenges relating to financing both in the private and public markets, we decided that this transaction provided a stronger financial position in this time of uncertainty,” a spokesperson for Carisma said.

The company did not elaborate on potential layoffs.

Carisma is developing therapies that harness myeloid cells, rather than the infection and tumor-fighting T cells used in approved CAR-T treatments from Novartis, Gilead Sciences and Bristol Myers Squibb. Its scientists believe this approach, which involves genetically modifying the macrophages that remove dead cells or attack bacteria, can help cell therapies work in more common tumor types. Its lead program targets the protein HER2, which is implicated in a variety of cancers. 

Carisma has drawn the interest of Moderna and Merck & Co. Moderna paid the company $45 million in January to start a research collaboration, while a trial expected to start this year will test Merck’s immunotherapy Keytruda alongside Carisma’s HER2-targeting treatment.   

For Sesen, meanwhile, the deal marks the end of the line. Originally known as Eleven Biotherapeutics, the company was formed by Third Rock Ventures and Flagship Pioneering in 2010. 

Eleven started out as a developer of protein drugs before morphing into a biotech focused on eye disease treatments. Its top prospect, a dry eye disease drug, failed multiple Phase 3 trials. Eleven sought to remake itself by acquiring a cancer drug startup and rebranding as Sesen in 2018, but the Food and Drug Administration rejected the treatment. Accusations of trial misconduct by investigators later surfaced, and Sesen began evaluating strategic alternatives in May.

Sesen executives said they reviewed 42 other bids before it chose Carisma’s offer. 

“Our mission at Sesen Bio has always been to save and improve the lives of patients with cancer, and we believe Carisma has the science and the unwavering patient focus required to make that mission a reality,” Thomas Cannell, Sesen’s president and CEO, said in a statement.

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