Axcella Health Shifts Focus from NASH to Long COVID Amid Financial Struggles and Nasdaq Delisting Risk

On February 15, 2023, Axcella announced that the U.S. Food and Drug Administration (FDA) had approved its Phase IIb/III clinical trial application for AXA1125 for the treatment of Long COVID.

Last September, AXA1125 delivered positive interim results from the Phase IIb EMMPACT clinical trial in patients with NASH. AXA1125 is a multi-target, oral combination of endogenous metabolic modulators that has attracted significant attention for its marked improvements in liver stiffness, inflammation, and hepatic fat content observed in clinical trials. The FDA granted Fast Track Designation (FTD) to AXA1125 for the treatment of NASH early last year.

As can be seen, Axcella has undergone many changes in just one year.

Last December, the company adjusted its pipeline, discontinuing the NASH program for AXA1125 to focus on its Long COVID project; it laid off 85% of its workforce, including the Chief Financial Officer and Chief People Officer. Axcella received a notification from Nasdaq stating that it faced potential delisting due to its stock price falling below $1, with multiple media outlets predicting that Axcella would shut down this year. Following a series of internal adjustments, Axcella chose to bet its remaining tens of millions of dollars on the Long COVID project. Fortunately, the project recently received approval to proceed into Phase IIb/III clinical trials.

Abandoning NASH to focus on Long COVID was a choice Axcella made at the board’s request amid funding constraints. The story behind this company also reflects the dilemmas commonly faced by the biotech industry.

Axcella is a clinical-stage biotechnology company, formerly known as Pronutria Biosciences, which was founded in 2009 by the prominent venture capital firm Flagship Pioneering. In June 2016, Pronutria Biosciences was renamed Axcella Health to better reflect its mission of promoting cellular health through amino acids using a systems pharmacology approach. Axcella has pioneered novel therapies for complex diseases utilizing multi-target endogenous metabolic modulators (EMMs). EMMs are key regulators and signaling agents in systemic metabolic pathways, capable of fundamentally regulating metabolism.

The drug design of the core pipeline candidate AXA1125 is highly ingenious. Branched-chain amino acids (BCAAs) can promote glucose uptake, increase insulin sensitivity, and reduce lipotoxicity. Arginine helps reduce ammonia levels and hepatocyte injury. Glutamine and arginine can also alleviate inflammation by affecting intestinal epithelial cells. Furthermore, N-acetylcysteine (NAC) promotes glutathione synthesis and reduces pro-inflammatory reactive oxygen species (ROS).

On September 29 last year, Axcella announced that the AXA1125 program demonstrated favorable outcomes in NASH:After 24 weeks of treatment, liver stiffness measurement (LSM) showed statistically significant improvement in the high-dose group across all subjects compared with the placebo group. These positive results confirm the multi-target effects of AXA1125, a differentiated therapy that directly and simultaneously targets multiple dysregulated pathways in NASH. Consistent with previous findings, AXA1125 demonstrated a favorable safety and tolerability profile in this study.

At that time,Axcella has publicly stated that it will advance the trial process as soon as possible, with expectations to report 48-week biopsy results in the first half of 2024. In its third-quarter financial report, Axcella also expressed a positive outlook on the progress of this project.

Continued project advancement requires additional financial support. In September 2022, Axcella secured $6 million through the issuance of convertible notes from funds affiliated with Flagship Pioneering. As of September 30, 2022, Axcella’s cash, cash equivalents, and marketable securities totaled only $25.4 million. In October, Axcella raised an additional $28.2 million in gross proceeds through a registered direct offering of common stock. “We believe investors were attracted by the results of the AXA1125 Phase IIa placebo-controlled clinical trial for Long COVID and the positive data from the NASH Phase IIb trial,” said Bill Hinshaw, CEO of Axcella, in the announcement.

While raising funds, the board of directors also underwent adjustments.Robert Rosiello and Torben Straight Nissen have joined the company’s board of directors, with Rosiello assuming the role of Chairman. Former Chairman David Epstein has stepped down from the board but will continue to support the company’s development as an advisor.

Rob Rosiello joined Flagship Pioneering in 2018 as Executive Partner and Chief Operating Officer. He is involved in the entire process of incubating new companies at Flagship, playing a pivotal role in the firm’s strategic planning, talent acquisition, and development strategies. Prior to this, Rob Rosiello spent more than 30 years at McKinsey & Company, where he provided valuable advice on corporate strategy, mergers and acquisitions, and improving business unit performance.

Internal adjustments are ongoing, while the external situation remains grim.In December, Axcella received a notification from Nasdaq stating that the company faced potential delisting due to its stock price falling below $1.

With adjustments in financing and the board of directors, the company’s development has involved an increasing number of stakeholders. To maximize shareholder value, Axcella announced in mid-December 2022 that it would reprioritize its projects and restructure its business operations.

Long COVID projects have become a key development focus, while NASH clinical trials will be discontinued.As part of its strategic restructuring, Axcella will reorganize its corporate structure and reduce its workforce by 85% to cut labor costs. This reduction includes the departure of key executives such as Chief Financial Officer Bob Crane and Chief People Officer Virginia Dean. Additionally, under an agreement with SLR Investment Corp., Axcella is required to repay its outstanding debt.

With its restructuring, Axcella can once again move forward with renewed agility to fully advance its Long COVID program toward market launch; however, in the short term, its ambitions in the NASH field have come to naught.

Fortunately, the Long COVID project has lived up to expectations, with its Phase IIb/III clinical trial recently approved by the FDA. The study has now gained recognition from regulatory authorities in both the United States and the United Kingdom.

Hinshaw stated that millions of people worldwide suffer from Long COVID, for which there are currently no approved treatments. Axcella has a leading program in this field, which has attracted significant interest from regulatory authorities in the United States and Europe; their feedback continues to drive the program’s development.

Following the layoffs, the company expects to survive through the second quarter of 2023. Currently, Axcella’s primary obstacle remains its cash flow. “We urgently need additional support or partnerships to advance this project,” Hinshaw told Endpoints News, noting that Axcella has recently been actively engaging with major pharmaceutical companies, government entities, and investors. Although the company emphasized in its press release, “There is no guarantee that the Board of Directors will recommend a strategic transaction.”

Axcella’s experience is not uncommon. Biotech companies are often adept at innovation and operate with agility, but they typically have fragile capital chains and a limited capacity to bear risk. Without venture capitalists willing to take risks and large pharmaceutical companies as partners providing long-term support, biotechs facing financial difficulties are forced to reluctantly shelve or voluntarily abandon promising projects. On the other hand, while financing can help biotechs temporarily weather crises in times of urgency, it also requires companies to make concessions to stakeholders regarding their operations and future strategic direction.

From the perspective of the NASH field, Axcella’s strategic choices are made in a disease area that is difficult to tackle, with high clinical failure rates. Although no drugs have yet been approved for market entry, the competitive landscape is crowded.Whether for large pharmaceutical companies or biotechs, temporarily halting NASH pipelines is a common adjustment.This year, Novartis has terminated the collaborative development of PLN-1474, an integrin αVβ1 inhibitor for NASH; Johnson & Johnson has returned Arrowhead’s NASH siRNA drug ARO-PNPLA3; and Merck has also decided to discontinue the Phase IIb study of MK-3655 (NGM313) for the treatment of NASH, returning the licensing rights for MK-3655 and its related compounds to NGM Bio by the end of April 2023.

The temporary shelving of NASH pipelines does not necessarily mean that research has stopped; the relay between large companies and biotechs will still bring new possibilities.Ipsen spent $136 million to acquire Genfit’s once-failed NASH drug candidate; Akero licensed in Amgen’s long-shelved AMG876. Meanwhile, Axcella’s NASH drug pipeline still has a chance to re-enter the race.